FSF pointers for the 'majidologists'

For those who watch the manoeuverings of the senior levels of Dubai Inc - "majidologists", I like to call them - there is much to mull over in last week's appointment of a permanent board to oversee the emirate's response to the global financial crisis. The naming of a six-man team to oversee the disbursement of cash from the Financial Support Fund (FSF) clarifies Dubai's recovery strategy, and gives intriguing hints at the shifting power structure at the highest levels of the Ruler's court, which in turn reflects the new priorities and imperatives of the emirate.

The task is to manage the allocation of the fund's resources. "The new board's primary duty will be to prepare and adopt the criteria to be used in the allocation of funds for Dubai's strategic revenue-generating projects," said the chairman, Abdul Rahman al Saleh. You have to assume these criteria are already pretty well advanced, given that Mr al Saleh has been working on them since his appointment as director general of the finance department in May, and until the end of June had the services of investment bank Rothschild to assist him in the job.

The naming of Mr al Saleh as chairman confirms the rapid ascent of the former official from the Customs Department. Since he took over from Nasser al Sheikh in controversial circumstances, he has been quietly stamping his authority on Dubai's financial apparatus, but in a sharply contrasting style from that of his predecessor. You can expect more of his cautious, methodical approach to Dubai's financial predicament. Those international observers who applauded Mr al Sheik's candidness and transparency will have to get used to Mr al Saleh's more conservative line. There will be no more talk of Dubai's past "mistakes", but instead a low-key determination to confront the challenges of the future.

His main operations man will be Marwan Iqbal Abedin, former marketing executive at the Emirates National Securitisation Corporation (ENSEC). His background indicates the central thrust of the Dubai strategy, especially on the immediate issue facing the FSF - how to raise the second tranche of cash to fund Dubai's recovery. The first fund-raising of US$10 billion (Dh36.7bn) in February was underwritten by the Central Bank, but Mr Abedin's experience suggests Dubai is considering other ways for the next $10bn tranche, and for any further cash that may be required after that.

The global credit crunch was sparked, it should be remembered, by the bundling together of property assets of dubious value into "toxic" debt instruments, and this has given securitisation a bad name in some financial circles. But for an economic entity such as Dubai, which works essentially like a gigantic global corporation generating revenue from ongoing operations and leveraged up by commercial borrowing, securitisation of forward revenue remains an appropriate way to raise money, as long as it is based on realistic asset valuations.

Much has been made of the figure of $80bn of debt revealed as Dubai's overall level of liability, but this is far outweighed by the value of Dubai Inc and those infrastructure assets already in place - such as ports, the financial hub, the transport system, including the new Metro and Dubai World Central International Airport, and the other facilities that still make Dubai the most attractive place to do business in the Gulf.

There is nothing wrong with leveraging up those valuable assets in a securitisation programme. The rest of the FSF board also provides useful pointers to how Dubai Inc is thinking. The deputy chairman is Abdul Aziz al Muhairi, managing director of the Investment Corporation of Dubai (ICD). Under Mohamed al Shaibani, the ICD has assumed the central role in Dubai's new economic strategy, eclipsing other power groups.

The chain of command from Sheikh Mohammed bin Rashid, the emirate's Ruler and Vice President of the UAE, is now firmly established. Via Mr al Shaibani and the ICD, it passes through the Supreme Fiscal Committee, the ultimate authority for FSF operations, with the collusion of the Finance Department under Mr al Saleh, down to the FSF board. It is significant that of the emirate's traditional corporate power brokers, only Sheikh Ahmed, the Emirates Airlines chairman, has a formal role in the new structure, as chairman of the Supreme Fiscal Committee. Sheikh Mohammed's uncle has had a good crisis.

But perhaps the most significant names on the FSF board are those of Mattar Mohammed al Tayer and Majid al Ghurair. Both would have merited their appointments anyway as heads of the Roads and Transport Authority and Shuaa Capital respectively, but of much greater relevance is the fact that they represent the big family-controlled corporate conglomerates that dominate commercial life in Duai, as they do in much of Arabian business.

Their involvement in FSF is a clear sign that the historic relationship between Dubai's ruling family and the merchant families that control the emirate's economic life is still firmly in place. The role of Mr al Tayer and Mr al Ghurair also hints that Dubai may be thinking of another fund-raising option - the flotation on the emirate's financial markets of these huge business dynasties. The board is rounded off with the appointment of a respected representative of the civil authority, Riad Mohammed Khalfan Belhoul, as legal counsel. Of course, there is always a lawyer.

fkane@thenational.ae