Top Emirates officials rallied together Wednesday, extolling the strength of the country's economy in a show of bravado that ignored the debt woes facing the one-time Arab boomtown of Dubai. In speeches on the national holiday marking the unification 38 years ago of seven small desert fiefdoms into the United Arab Emirates, they stressed the country's push to grow and diversify its economy to face any adversity. Their speeches did not mention the crippling $60 billion debt owed by Dubai World, the city state-owned conglomerate with interests ranging from ports to luxury retailer Barney's New York that have powered the emirate's growth. Dubai World shocked global markets last week by announcing it would ask creditors for at least a six-month reprieve in payments on $26 billion of its debt as it undergoes a restructuring process. The announcement sent ripples of fear throughout the world as investors worried both about Dubai World's possible default and that it was an indication of broader global problems that could undermine the world's shaky recovery from the worst recession in decades. Dubai had built itself up from a desert hamlet to a Middle Eastern Disneyland on borrowed cash. Cheap credit over the past few years provided developers with the money they needed for soaring skyscrapers and luxury residential compounds on man-made islands. The global meltdown dried up that liquidity and property prices collapsed as the bills came due. Fears about Dubai's inability to pay sent global markets tumbling sharply last week and hammered ones in the Gulf region earlier this week, with the UAE's main bourses posting losses as high as 8 percent in one day. But on the national holiday, UAE officials were upbeat. “There is no doubt that the drastic changes and challenges which the global economy is facing prove that the (UAE) economy is strong, built on a solid foundation able to withstand crisis, no matter how difficult,” said Economy Minister Sultan Al Mansouri. “We reaffirm the strength of the economy, and its ability to overcome upcoming challenges,” he added, according to the official news agency, WAM. Nasser Al-Sweidi, chief of the Abu Dhabi Economic Department, reaffirmed the country's pride in the “wise political leadership” that has steered the economy toward diversification and development of non-oil sectors. “The economy was able to maintain its strength and steadfastness throughout 2009 amid the international financial and economic crisis,” Al-Sweidi said. However, authorities have fueled investor concerns by saying Dubai World's debt crunch was its own - and not something for which the Dubai government was responsible. The uncertainty over how Dubai World and Dubai itself will deal with the debt sent global markets spiraling late last week, while the two biggest UAE bourses and others in the Gulf Arab region recorded sharp drops starting Monday, the first day of business after an extended Islamic holiday. Dubai World recently said it launched debt restructuring talks with creditors on $26 billion of its dues. The company said the restructuring would include about $6 billion in Islamic bonds issued by its real estate arm, Nakheel, the company behind Dubai's iconic, palm-shaped artificial islands. About $3.5 billion of the bonds come due on Dec. 14, and Nakheel was viewed as the litmus test for how the company would deal with its debt woes. It did not address the broader issue of how it would meet its entire crushing debt burden. Excluded from the process were debts from Infinity World Holding, Istithmar World and Ports and amp; Free Zone World. That subsidiary includes ports and terminal operator DP World, Economic Zones World, P and O Ferries and Jebel Ali Free Zone, which on Tuesday said it paid a roughly $2 billion Islamic bond on time. Among other unanswered questions were whether and with how much Abu Dhabi would step in with some sort of bailout. Analysts have said the government would likely not allow a major default, but that any steps taken by Abu Dhabi would come at a price for Dubai, whose meteoric and glitzy rise to fame far overshadowed Abu Dhabi's more conservative, oil revenue driven development push.
