Dubai vows to meet contract obligations

source Gulf Daily News

DUBAI: Dubai's government will continue to meet all its contractual obligations, including to contractors, but said it would not decide how companies that had received state aid would use those funds.

Dubai launched a $20 billion bond programme in February, issuing the first half to the UAE central bank to enable the Dubai government to support firms struggling to meet debt and other financial commitments.

Dubai has suffered from a sharp downturn in real estate prices and scores of expansion projects have been shelved, leading to thousands of job cuts.

Several Dubai-based contractors have said they are owed hundreds of millions of UAE dirhams by state-linked developers and some may face bankruptcy as credit dries up.

Dubai's department of finance head Nasser Al Shaikh said Dubai government would not reveal the names of the firms receiving support from the first bond proceeds, although the key beneficiaries were real estate companies in which the Dubai government holds some ownership stake.

"The government of Dubai will continue to meet all its contractual obligations, including to construction contractors, as per the terms agreed with all third parties," it said.

"It wishes to clarify that those companies that have received funding via the recently set-up Financial Support Fund received such funds on strictly commercial terms, and that the utilisation of such funds remains at the sole discretion of individual companies."

London-based MEED reported in its latest issue Dubai would only settle debts with contractors it wishes to work with in future thus reducing the number of contractors operating in the Gulf trade and tourism hub.

"There is no point in paying off everyone that is currently unpaid...It makes more sense to decide who to continue with, settle their outstanding debts, and then get them to work on ongoing projects," MEED reported citing an unidentified source close to the distribution of funds.

The Dubai government denied the MEED story.

"Dubai has no intention to limit at any time the number of contractors licensed to operate in the emirate," it said.

Banks and property firms in Dubai are renegotiating contracts and litigation cases are mounting as the global financial crisis hits the emirate.