DUBAI, (Reuters) – Dubai’s biggest government-linked holding companies unveiled a major restructuring on Sunday, consolidating operations to cut costs as the global downturn hit at the core of the emirate’s financial and property sectors.
Dubai Holding, owned by the ruler of Dubai and driver of many of the emirate’s ambitious plans that have fallen on hard times, said it would restructure and merge operations at key property firms and other holding firms to reduce costs.
The reshuffle in Dubai, home to the world’s tallest building and man-made palm-shaped islands, marks how hard the crisis has hit the financial, tourism and property sectors in the former Gulf Arab boomtown.
Dubai Holding, which is at the centre of a complex ownership structure controlled by the Dubai ruler, Sheikh Mohammed bin Rashid al-Maktoum, said it would merge back-office operations at three of its real estate entities, Dubai Properties Group, Sama Dubai and Mizin to cut costs.
“While the ownership and core activities of the three companies will not change, this will lead to closer working relationships by realizing efficiencies through the consolidation of their back-office operations,” Dubai Holding said in a statement.
The public relations company representing the Dubai state-controlled groups declined to elaborate on the statements or comment on job cuts.
The three firms have played a role in some of the seaside emirate’s most high-profile projects, including its Business Bay office development and the mass-luxury skyscraper complex called Jumeirah Beach Residence.
Dubai rode the real estate wave that buoyed many property markets up to 2008, when the financial crisis hit. Now, thousands of workers have been laid and expatriates sent home.
Dubai’s real estate sector is facing a sharp price correction and hundreds of billions of dollars of construction projects have been cancelled in the United Arab Emirates as a result of the economic slowdown.
In a separate statement, Dubai Holding said it would consolidate back-office operations and revamp management structure at some of its most important sub-holding groups, including Dubai International Capital and Dubai Group.
Dubai Holding is a large and diversified group created to consolidate the large-scale infrastructure and investment projects that underlie Dubai’s development.
Dubai Group is the self-styled architect of the emirate’s push into financial services and controls important stakes in a firms including Dubai Bank, according to the group’s website.
Dubai International Capital, or DIC, functions as an overseas investment arm with around $13 billion in assets, and is one of the Gulf Arab investment vehicles thought to have lost billions in the crisis through stakes in top Wall Street firms.
Dubai’s mostly government-linked issuers need to refinance about $15 billion in debt before year-end, compared with about $5 billion in the rest of the UAE and $15-20 billion in the rest of the Gulf, according to ratings agency Moody’s.
But confidence in the emirate’s ability to repay has weakened in recent months, with the cost of insuring against a debt default widening steadily.