Dubai backed by UAE president as markets fall again

The president of the United Arab Emirates has moved to try to reassure the shaken nerves of investors.

Sheikh Khalifa bin Zayed al-Nahayan issued a statement saying the UAE economy was in good condition.

He also praised Dubai's leader, saying he managed daily "achievements". The Sheikh's comments come after almost a week of market turmoil.

It was sparked when Dubai World, Dubai's highest-profile company, said it would reschedule part of its debts.

Verbal support

The UAE president said the Gulf region would not slip due to what he called the global financial crisis.

WHAT IS DUBAI WORLD? The emirate's flag bearer in global investments Has a central role in the direction of Dubai's economy Assets include DP World, which caused a storm when trying to take over six US ports Property arm Nakheel built The Palm Islands and The World developments How Islamic finance missed heavenly chance

Sheikh Khalifa paid tribue to the ruler of Dubai - who is also his UAE vice president, prime minister and defence minister - saying Sheikh Mohammed bin Rashid al-Maktoum and his cabinet "face every morning challenges, but plan and remove all obstacles to score achievements".

But his supportive remarks appeared to do little to soothe nerves in the region. Markets across the UAE fell sharply for the second day in a row. Shares in Dubai fell by 5.61% and Abu Dhabi fell by 3.57%. Qatar's main index closed down 8.27%.

Those markets though have had less time to react to the news last Wednesday of Dubai World's debt standstill. They were closed for the Eid holiday last week.

Major Western markets have had longer to process its impact and the major European indexes closed more than 2% higher on Tuesday.

Nothing concrete

Last night, in its first statement since the crisis began last Wednesday, Dubai World unveiled something of its plan for restructuring $26bn (£15.8bn) of its borrowings.

Although thin on detail, the firm said that it "intends to adopt a policy of regular communication and will provide further updates as the process develops".

At the heart of the plans to reshape the business is its highest-profile arm, Nakheel, the property company that built the stand-out offshore Palm Island and The World developments.

The company's former director of development, Sunil Gomes, told the BBC that Nakheel took on too much, too soon.

"When any company goes through the growth that something like Nakheel has done, you end up with a lot of people who probably don't have the necessary experience for the jobs they took on."

Hassaim Arabi, chief executive at Gulfmena Alternative Investments said the restructuring statement was good news.

"It shows they are still committed to their payments and it removes all fears that this is a complete default," he said.

On Sunday, the central bank of the UAE stepped in and announced a facility to provide banks with extra liquidity.

The liquidity will be available to all UAE banks as well as foreign banks operating in the Emirates.

On Monday, Dubai's government distanced itself from Dubai World's problems saying that it would not guarantee the company's debt.

"[Creditors] think Dubai World is part of the government, which is not correct," said finance minister Abdulrahman al-Saleh.

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