DUBAI: Dubai is back in business, or at least on its way to repairing an image devastated by a debt crisis. Less than three years ago foreign investors turned their backs on Dubai, the tiny desert city-state with grand ambitions built on massive debt, after state-conglomerate Dubai World announced it would restructure about $25 billion in debt. But now, Dubai's flagship airline has successfully marketed a $1 billion bond, hotels have attracted thousands more guests and unrest across the Middle East has persuaded some businesses to move some of their offices to the more stable emirate. “At one point I had investors tell me they didn't want Dubai at all in their portfolios,” said a banker. But the success of Emirates bond this month, attracting orders of over $6 billion, is one of the clearest signs yet of returning confidence and served to show the airline's importance to Dubai's economy and international image. “Being able to get any airline debt away in a world with $100-plus crude oil prices, the biggest component of an airline's costs, is impressive,” said Daniel Broby, chief investment officer of UK based asset manager Silk Invest. “The fact that it was a Dubai-based airline is even more impressive.” Emirates priced its bond on the same day that global ports operator DP World, another of Dubai's prized possessions, made its debut on the London Stock Exchange. “The DP World listing and Emirates bond are the sort of instruments to show that Dubai has returned,” said Saj Ahmad, analyst at FBE Aerospace in London. Appetite for Dubai debt has been rising in recent months, and CDS levels have sunk back to pre-2009 crisis levels. Not only is the Dubai government planning to issue new bonds this week after a London investor road show, but it recently announced an extension of its bond programme to $5 billion. The pick-up in sentiment is a far cry from November 2009, when Dubai World's plan to restructure about $25 billion in debt sent investors fleeing practically overnight and translated into negative growth for the once high-flying economy. There is also an unavoidable sense of optimism. In 2010, Dubai's GDP per capita was just under $42,000, one of the highest in the world. Driven by trade, financial services and tourism, Dubai's economy recovered in 2010 with 2.4 percent growth and is projected to expand by another 3 to 3.5 percent this year. In contrast, the World Bank expects 1.9 percent growth in the Middle East and North Africa in 2011. Cranes are purring back to life and tourists are flocking back to Dubai's delights such as a ski slope in the desert, one of the world's largest shopping malls and its tallest tower. In the first quarter, hotel guests numbered more than 1.8 million, a 14 percent increase compared with the same period last year, according to the Dubai Statistics Center. “With the so-called Arab Spring shutting down other major tourists markets in the region, notably Egypt, Jordan and Bahrain, tourists flocked to Dubai,” said Guy Wilkinson, managing partner at Viability Managements Consultants, a hospitality consultancy based in Dubai. Businesses and capital inflows into Dubai — though hard to quantify accurately —have also increased largely because of political uncertainty in Bahrain, a well established financial hub in the region, money managers and bank executives say. Many companies have shifted offices or staff to the city, while UAE bank deposits climbed to their highest level in at least more than two years in April. “Companies are physically moving to Dubai — for some, the regional unrest is an opportunity to have a reasonably large presence in Dubai,” said Ghanem Nuseibeh, founder of Cornerstone Global Associates and senior analyst at Political Capital. On Dubai's streets, conversations once more center on eating out at the latest restaurant and watching pop acts like Usher, Macy Gray and Joe Cocker who have all played to packed houses. But Dubai has been accused of storing up its troubles by postponing debt payments rather than resolving them. Dubai World's 2010 debt deal delays repayment to after five and eight years, and no Dubai asset sales have yet been announced.
