Dubai will need investor support

28 April 2010

But it needs to convince banks of the viability of the Dubai World Central project to get them to lend to it

When the first phase of Al-Maktoum International Airport at Jebel Ali opens on 27 June, the business case for developing the $30bn Dubai World Central project will strengthen considerably.

Until now the airport has been an empty construction site, with few incentives for developers to build commercial or residential space nearby – especially in a market place that is oversupplied with property.

That will start to change when cargo services start in June, followed by passenger traffic in March next year. The airport is a long drive from Dubai’s main residential and commercial centres, and people and businesses will want to be located closer to their workplace.

Dubai hopes the business case of the new airport is strong enough to attract investment. The credit crunch has wiped out the emirate’s ability to develop projects on its own, and financiers are no longer prepared to fund projects that appear speculative.

The Department of Civil Aviation (DCA) says banks will be more willing to finance infrastructure projects that will play an integral role in boosting the broader economy, and it believes the new airport will do just that.

The danger is that the airport does not have enough traffic to support development in the area. Emirates airline has said it will stay at the newly expanded Dubai International Airport for the next 10 years, and it remains unclear which carriers will use the new airport.

Cargo will be key to the airport’s success. The new airport is located near to the region’s largest maritime port at Jebel Ali and the area could develop into a logistics hub with good links for both air and sea freight.

If financiers buy into this vision, then Dubai will secure the funds it needs to move ahead with these plans. If not, Dubai World Central, like many other projects in the emirate, will struggle to move forward.

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