Monday 30 December 2013

IPOs Initial Public Offers fostering Dubai’s Business and Economy

Global economic recession of year 2008 had badly hit the economy of Dubai and property prices showed downfall of 65%. After experiencing four years of consecutive downfall, real estate sector of Dubai showed first sign of recovery in year 2012. Recovery signs also support investors to regain their confidence and they rejoin the real estate industry to make investments. Good progress rate of business and real estate sector has enabled State Government to take significant steps to clear debts and generate funds to stabilize Emirate’s economy. IPO Initial Public Offers, selling stakes/shares of Governmental companies among public is a very bold initiative taken by State Government. IPO can generate funds quickly. IPOs also help Dubai Government to protect itself being a defaulter.

How IPO Helped Dubai Government?

IPO has helped government to generate $26billion funds after selling Islamic and non-Islamic bonds in 2013, whereas $17.93 billion bonds will mature in next year. Sheikh Ahmed bin Saeed Al Maktoum, head of the emirate’s Supreme Fiscal Committee, clearly mentioned that stock market still needs more companies to sell their shares to general public via IPO to generate more funds. He further said ICD, Investment Corp. of Dubai; the Emirate’s main state holding company can be the next potential IPO. ICD is a huge company, which possesses shares in more than 30 companies including Emirates (world’s biggest international airline). He further quoted that Dubai is committed to repay its debts and will do “whatever we have to do.” Issuers in Dubai or IPOs have sold securities of $5.8 billion so far in 2013. Government’s strong interest to generate funds and profitable investment opportunities predicted that economy will expand 4.6% on average between 2012 and 2015, which is more than twice of the average economical growth in previous 4 years.

Positive Outcomes of IPO

Clearing debts and generating more funds can expand business andinvestment opportunities in the region. Dubai Government has efficiently regained its previous status by selling 30-year bonds and 10-year Islamic bonds of total worth $750 million in the month of January 2013. Further they also reduce their borrowing by 40%. Top financial officers further shares that Government has refinanced companies to clear their debts, with total $3.75 billion in 2012 in addition to a 3.3 billion Dh ($898 million) liabilities in April 2013. Reduced credit risk in the emirate also provoked Issuers in Dubai to maximize bond sales during this year. According to Dubai Financial market General Index ranked Dubai as third best performer after Ghana and Argentina in year 2013. 

1 comment:

  1. Nice article . But I can add also many other factors such as the Arab spring which led to influx of a lot of money, growth in tourism , the dymanic of the government in running bussiness, growth of bussiness in UAE and the surrounding GCC plus few less effective factors.