Dubai has been able to manage its debt issues and is not in an urgent need for a credit rating, a senior government official said.
"Dubai is to be rated by which agencies? By the same agencies which between 2002 and 2008 had given most international corporations very high ratings including AIG?" Hisham Al Shirawi, 2nd Vice-Chairman, Dubai Chamber, said. "These agencies rated those organisinations very highly but then reality proved those ratings were not genuine thereby contributing to the disaster which we are all suffering from."
Currently, Abu Dhabi (AA) and Ras Al Kaimah (A) has credit ratings, with RAK aiming to increase its rating to AA. Dubai's government on the other hand has no immediate plans to seek a credit rating, the emirate's finance department in August.
"We just have take care of our house and make sure that all our practices are right, that we have governance and transparency and make sure that we work hard and these will bear fruits. Whether they give us great or low ratings, eventually, is as far as I am concerned, redundant," Al Shirawi said.
He said organisations operating in Dubai are profitable and successful until they were led by advisors and consultants to expand internationally using heavy leverage. "Actually, all our organisations locally are fine. It is the advisors that pushed companies to invest abroad. For some reasons somebody has told them to go outside, which resulted in debts," he added.
Al Shirawi said the success of Dubai World restructuring shows that the emirate has managed to settle its financial issues. The move to divide Dubai World assets, he said, will make each divisions recover quickly.
"The higher committee for the restructuring of Dubai World has embarked on breaking Dubai World into different parts and assigned separate board of directors for each one of those parts making it easier to manage and administer. I'm sure with the right practice and in the right time, all of them are going to recover," he said.
Dubai World has confirmed that it secured support from all its creditors for a $25 billion debt restructuring plan, helping to avoid a drawn-out battle with a special tribunal.
Thanks in part to the optimism brought about by the Dubai World restructuring, the third quarter showed some evidence of the eagerly awaited revival in the GCC debt capital markets, NCB Capital said in a note.
Dubai World's agreement with its creditors to alter the terms on the $25bn of debt has restored investor confidence, as evinced by the subsequent $1.25bn conventional bond issue by the Government of Dubai that was four times oversubscribed, the note said.
Despite the absence of credit rating, the Government of Dubai, in reflection of the improving economic confidence in the emirate, issued two tranches of $750m and $500m, respectively, on 29 September. Both tranches were denominated in US Dollars, with $500m worth of the debt due to mature in October 2015 and $750m tranche in October 2020.
To further speed up recovery, Al Shirawi said, cooperation between the private and public sectors should be heightened. "There should be cooperation between everybody not just among the federal states but also cooperation between the corporations, employees, customers, government agencies."
He said the government is aware that updating legislations will improve the business environment for the private sector. "There could be certain articles that can be incorporated into the new laws which could encourage good governance and a better decision making environment. We are going to see them very soon," he added.