Exclusive: Abu Dhabi in talks with Dubai for support through state fund Mubadala - sources

By Davide Barbuscia, Saeed Azhar and Pamela Barbaglia DUBAI/LONDON (Reuters) - The governments of Abu Dhabi and Dubai are discussing ways to prop up Dubai's economy by linking up assets in the two emirates, with Abu Dhabi's state fund Mubadala likely to play a key role in any deal, three sources familiar with the matter said. Some economic sectors have come to a near standstill in Dubai during the coronavirus outbreak, and it faces its most severe downturn since a 2009 debt crisis

Reuters May 16, 2020 03:05:36 IST
Exclusive: Abu Dhabi in talks with Dubai for support through state fund Mubadala - sources

Exclusive Abu Dhabi in talks with Dubai for support through state fund Mubadala  sources

By Davide Barbuscia, Saeed Azhar and Pamela Barbaglia

DUBAI/LONDON (Reuters) - The governments of Abu Dhabi and Dubai are discussing ways to prop up Dubai's economy by linking up assets in the two emirates, with Abu Dhabi's state fund Mubadala likely to play a key role in any deal, three sources familiar with the matter said.

Some economic sectors have come to a near standstill in Dubai during the coronavirus outbreak, and it faces its most severe downturn since a 2009 debt crisis. It lacks the oil wealth of Abu Dhabi to cushion the blow.

Abu Dhabi bailed out Dubai after the 2009 crisis with a $10 billion government loan, which was subsequently rolled over, and $10 billion in bonds that Dubai issued to the central bank.

One of the sources said any support from Abu Dhabi agreed now would be "orchestrated through mergers of assets where Abu Dhabi and Dubai compete directly or where they have joint ownerships".

"The most likely deal to happen in the near term is a merger of the local stock markets," the source said, adding that bank mergers were also possible.

A second source confirmed the talks and said Mubadala, which manages around $230 billion in assets, would make "a big move into Dubai", but gave no details.

Mubadala declined comment. Abu Dhabi did not respond to requests for comment on the talks.

The Dubai media office said on its official Twitter account late on Friday that Dubai denied being in talks with Abu Dhabi for support from Mubadala.

The two emirates have a quiet rivalry. Dubai has developed quickly to become the Middle East's tourism, trade and business hub, while Abu Dhabi is the UAE's political capital because of its size and immense oil wealth. The consolidation of political power in Abu Dhabi began with the 2009 bailout.

The first source said talks were happening in an "elegant way," without the appearance of a direct bailout.

The UAE said on Wednesday it would review the structure and size of its government to make it "more agile and flexible".

"We may merge ministries and alter bodies. We will make changes," UAE Vice President Sheikh Mohammed bin Rashid al-Maktoum, who is also ruler of Dubai, said following three days of virtual meetings on the country's post-coronavirus strategy.

A third source said Mubadala was likely to be involved "at some stage" because the state fund was always involved whenever there was consolidation between the two emirates in the past.

STRATEGIC ASSETS

Mergers took place after Abu Dhabi bailed out Dubai following the 2009 crisis, during which Dubai's property market crashed, almost forcing some state-linked firms to default on billions of dollars of debt.

The UAE merged Dubai and Abu Dhabi aluminium firms to create Emirates Global Aluminium, held jointly by Mubadala and the Investment Corporation of Dubai.

"You have already seen a pattern of mergers and this will now accelerate," the first source said. "Essentially these bailouts will be engineered by having Abu Dhabi taking stakes in strategic assets owned by Dubai. It will happen over time."

London-based Capital Economics has said Dubai is the most vulnerable of the economies in the Middle East and North Africa to the economic damage caused by measures to curb the spread of the coronavirus, and it has said Dubai's economy could contract by at least 5-6% this year if the measures last into the summer.

Economic growth in Dubai was sluggish before the pandemic and hopes of benefiting from hosting the Expo world fair in October collapsed when the event was postponed to 2021.

Dubai has in recent weeks been in discussions with banks for several fundraising options including loans and privately placed bonds, sources familiar with the discussions have said.

It has also considered raising funds backed by road toll revenue, sources have said.

(Reporting by Davide Barbuscia, Saeed Azhar, Pamela Barbaglia; Additional reporting by Hesham Abdul Khalek; Editing by Timothy Heritage)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.