Dubai scrambled to restore its reputation on Thursday, assuring investors that major property and leisure projects would go ahead and dispatching two top officials on a public relations drive to Washington, according to Reuters. Dubai raised fears of a second round to the global financial crisis on Nov. 25 when it asked for a standstill on $26 billion of debt linked to flagship conglomerate Dubai World and its property units Nakheel and Limitless. This week, Dubai"s wealthier neighbour and fellow member of the United Arab Emirates, Abu Dhabi, lent it $10 billion to meet Dubai World"s obligations until the end of April and stave off a bond default by Nakheel, developer of its palm-shaped islands. But confidence remains shaky, with syndicated lending in the Middle East at a five-year low, and bankers say Dubai companies will now need explicit government support to borrow abroad. In a bid to restore the reputation of the Gulf business hub famous for extravagant developments such as the world"s tallest building, the U.S. Treasury said two senior Dubai officials would meet Treasury Secretary Timothy Geithner later on Thursday to discuss the debt crisis. Sheikh Ahmed bin Saeed al-Maktoum, chairman of Dubai"s Supreme Fiscal Committee, and Mohammed al-Shaibani, chief executive of the Investment Corporation Dubai, also met officials in London on Wednesday, a government source said. Abu Dhabi"s loan has alleviated immediate concerns, but banks remain uneasy about the billions of dollars they lent to fuel Dubai"s development boom on the assumption the emirate or the oil-rich federal government would back the debt. "The headline risk remains, as Dubai World is still involved in a fluid process, so it is still key to proceed the dialogue with international investors," said Ali Khan, managing director and head of brokerage at Arqaam Capital. Dubai"s government may also repay outstanding 2010 and 2011 Islamic bonds issued by Nakheel and provide further funds to Dubai World, the Financial Times said. But some analysts said it needed to take concrete steps to improve transparency and communication after leaving investors in the dark about the fate of their money for three weeks. "We really need to see more practical implementations: new regulations should be adopted ... decisions on legal issues and regulation should be cleared and up to international standards," said Samer al-Jaouni, General Manager of Middle East Financial Brokerage Co. PROJECT GO-AHEAD Dubai"s developers said their projects would still go ahead. Development on Nakheel"s The World islands, one of the assets it might look to sell to ease the debt crunch, is set to begin within months, a company spokeswoman said. "Thirty-three islands have been handed over to developers in the past year, and since handover they have been working to obtain the necessary design and planning approvals, permits, and titles," she said. "We anticipate that several developers will be ready to start construction on their islands in the coming months." Meanwhile, Dubai Properties Group, a unit of Dubai Holding, which is owned by the emirate"s ruler, said it was committed to completing its Tiger Woods golf course, a rare piece of good news for the world"s top golfer, who has lost a number of his commercial backers since being caught up in a sex scandal. In the boom, Dubai lured wealthy visitors and courted the media with celebrity-endorsed projects and developments such as The World, a man-made archipelago in the shape of a world map. But whereas neighbours funded growth with proceeds from soaring oil prices, Dubai borrowed to invest through a network of state-linked conglomerates that offered limited transparency. Dubai World"s troubles have raised fears among investors that other government-linked firms could also face problems. DELAY REAL ESTATE RECOVERY Goldman Sachs said events in Dubai could delay the recovery of the UAE"s real estate sector, already hit hard by the global crisis, and put downward pressure on property prices and rentals. Data for the third quarter of 2009 suggested the UAE real estate sector was showing early signs of recovery, with prices and rentals beginning to stabilise. "The extent of the impact on the sector will largely be a function of how the restructuring of Dubai World unfolds - which remains unclear at this stage," the brokerage said. Goldman said the real estate focus in the UAE was shifting to Abu Dhabi from Dubai. Property prices in Dubai are down about 50 percent from their peaks last year and billions of dollars worth of projects have been put on hold or cancelled since the downturn began.
