On 10 May 2011, the second international debt management conference, “Best International Practices in Public Debt Management Strategy”, was held in Abu Dhabi. The purpose was to discuss public debt management in the UAE. Press reports quote the Minister of State for Financial Affairs, Obeid Humaid Al Tayer, stating that the conference was: “in line with its [the ministry’s] ongoing commitment to develop prudent management of financial resources”. The event was also an opportunity for the UAE to show itself as a leader in the global market for public debt management, ahead of completion of the UAE Public Debt Law (New Law).
The media reported that many local, regional and international experts took part and there were discussions between the board of directors of the UAE Central Bank and members of the International Advisory Council on the advantages of a public debt market. Panel discussions focused on (i) debt management and (ii) methods of developing debt markets.
The New Law signals a move towards the UAE issuing its first government bond later this year or in early 2012. Although the Emirates of Abu Dhabi, Dubai and others have sold debt to investors in the past, this would mark the first time that bonds would be issued at a federal level by the UAE.
Issuing bonds at a sovereign level should also develop the local currency debt market as anticipated in the White Paper. Dr Nasser Saidi, Chief Economist and Head of External Relations at the DIFC Authority, in a recent press article noted that reviving the debt market is of key importance, stating that: “Economic development has been impaired by the lack of liquid debt and sukuk market and has limited the sophistication of financial institutions and investment management companies”. He also stressed the potential of the New Law to aid economic growth in general in the UAE, as well as follow the international trend of developing domestic bond markets to aid economic growth.
The UAE’s Federal National Council approved the New Law on 28 December 2010. The New Law awaits the approval and signature of His Highness Sheikh Khalifa Bin Zayed Al Nahyan, President of the UAE, before it will come into force in the UAE. So far no timetable for the New Law has been released, although reports anticipate that by late 2011 the final timetable will be available.
If you would like to know more about the background to the New Law, the White Paper mentioned here and the potential government bond issue, please see our article in Middle East Legal Update of March 2011: “Will Markets See a UAE Government Bond Issued in 2011?”. Alternatively, please contact any of the people listed here.