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Dubai’s government has moved to reassure investors after abruptly sidelining the emirate’s recently appointed director of finance as he sought to lessen the effects of the economic crisis.

Nasser al-Shaikh was appointed eight months ago to restructure the city’s economy. Falling property prices and the credit crunch have hit Dubai’s financial model hard, with work stopped on hundreds of building sites and the government and state-owned developers facing debts totalling $80bn (£52bn).

But this week Mr al-Shaikh was unexpectedly moved to a position in the emirate’s foreign affairs office with no explanation given.

Speculation was rife that he had fallen out with an adviser to Sheikh Mohammed bin Rashid al-Maktoum.

On Tuesday night, the government released a brief statement attempting to draw a line under the controversy and to reassure the financial markets, which regarded Mr al-Shaikh as an innovator keen to introduce more openness into Dubai’s financial management.

The statement said that his replacement, Abdul Rahman Saleh al-Saleh, a senior official at the customs agency, would continue to pursue similar policies as his predecessor.

Mr al-Shaikh’s main achievement has been the successful issuing of a $10bn bond, bought by the federal government of the United Arab Emirates, which eased the immediate financial concerns of the major state companies.

In an equally unexpected, separate development, the federal government of the UAE also announced it was pulling out of plans for a common Gulf currency.

The new currency, to be shared between the UAE, Saudi Arabia, Kuwait, Bahrain and Qatar, was due to be issued next year. The UAE, the second biggest economy in the group after Saudi Arabia, was upset at a decision taken last month to site the new Gulf central bank in the Saudi capital Riyadh.

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Dubai is expecting a deficit-free budget next year as the emirate moves to slash its operational expenses. It is also planning to decrease its fees to further stimulate the economy but is not contemplating any salary cuts for government employees, Emirates Business has learnt.

According to Nasser bin Hassan Al Shaikh, former director-general of Dubai Department of Finance, Dubai has incurred a Dh4.2 billion deficit this year because of its decision to push all its infrastructure projects.

Talking to Emirates Business before his appointment as Deputy Director of Foreign Affairs at Dubai Ruler’s Court, he said the deficit, which has been the result of increased public spending (Dh37.7bn) at a time when non-oil GDP growth is slowing and the price of oil is at low levels, is only 1.3 per cent of the emirate’s overall GDP and is thus manageable.

“The number is manageable. Anything at three per cent or below is within the global benchmark, this is the acceptable standard as stated by World Bank and IMF.”

“Most probably we will be running a balanced actual budget by the end of the year,” he said. “And if we keep seeing the same trends that we witnessed in the first three months – revenues have not been affected, expenditures have dropped on the operations side – we shall have no deficit next year.”

Al Shaikh said Dubai is maintaining its policy of not increasing any government fees to further stimulate the economy. “To the contrary we are looking at the possibility of reducing some of the fees,” he added.

The government has also no plans to cut the pay of its employees. “The government has no plans of doing it,” he said. “This is something that His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, has been very clear about. The government is not considering any layoffs and is not considering revising its pay scales.”

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Somali pirates were foiled from hijacking a Dubai-based oil tanker over the weekend thanks to the brave actions of the captain, and the rescue efforts of the Australian navy, the ship’s operator revealed.

The pirate attack on the Dubai Princess took place on Sunday in the Gulf of Aden, which has become a hot-bed of pirate activity in the last six months.

The 250 metre, 115,485 tanker, was on its way to Sudan in a convoy when it was forced to accelerate to top speed and zig-zag through the water, to escape a pirate ship, which came within 15 metres of it, according to UAE daily The National.

The chase lasted more than an hour during which the Pakistani captain and his 24-strong crew were fired upon by submachine guns and rocket-propelled grenades.

An Australian naval frigate and helicopter support, which was acting as escort for the convoy, arrived in time to prevent a second attack from another pirate vessel, said Emarat Maritime the tanker’s operator.

“We are very relieved,” said Jitendra Misra, managing director of the firm, adding his praise for the ship’s captain Syed Naqvi and crew.

“Capt Naqvi has done an excellent job and pulled off some amazing manoeuvres,” said Misra.

The pirates were getting ever more clever, he added, explaining that they worked in teams of two, with one acting as a decoy for the rescuing warship, while the other took over the tanker.

“They follow a method where the first skiff attacks. A warship arrives to chase off the first skiff and meanwhile from the other side a second skiff takes the target,” Misra said.

The tanker which was sailing from Singapore to Sudan to pick up a cargo of oil was now heading for Port Sudan where the damage from the assault would be assessed, he added.

Pirate attacks worldwide almost doubled in the first quarter of the year, to 102, according to the International Maritime Bureau’s piracy reporting centre.

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Dubai’s new international airport – Dubai World Central-Al Maktoum International (DWC-AMI) is on course to open in June 2010.

The new airport is part of Dubai World Central (DWC) – a 140-square-kilometre aviation and logistics city in Jebel Ali. Paul Griffiths, chief executive of Dubai Airports Company, which has the mandate to operate both Dubai International and Dubai World Central-Al Maktoum International (DWC-AMI), has confirmed that phase one of the DWC-AMI will be open by June 2010, despite rumours of further delays.

“As we are expanding capacity within the Dubai International, the pressure to open DWC-AMIA is less,” he says “But the new airport will open in June 2010 with the first runway and terminal and will be able to handle nine million passengers. We expect that airport initially to take some of the heat out of the peak traffic out of Dubai International (DIA). Initially it will handle some of the general aviation, some of the executive aviation, some of the cargo flights and some of the passenger aircraft, but because of our very liberal open skies policy we are optimistic that it will attract new carriers who will want to establish new operations and we are optimistic we will get some low cost operators in there.”

The second phase of DWC-AMI will include four more runways with the airport eventually taking up to 160 million passengers and 40 million tonnes of freight.

“We are also simultaneously investing in the capacity of Dubai International with the aim of creating enough capacity to make sure we don’t run out.”

Griffiths refused to be drawn about the eventual fate of Dubai International once Al Maktoum is fully open.

“We don’t need to make a decision about the 240 million spread [of passengers] right now, though it’s an interesting discussion,” he said “There will be a role for both airports, but whether we continue with two airports forever is not something we need to decide now.”

Dubai Aviation City Corporation incorporates both Dubai World Central and Dubai Airports Company.

Meanwhile, Dubai Logistics City (DLC) has begun licensing completed warehouses and logistics offices and handing over facilities to tenants to commence operations on-site.

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A recovery in the Dubai real estate market might not happen until late 2011 as a result of subdued investor sentiment, according to a new report by EFG Hermes.

Analysts at the Egypt-based investment bank, in a report published on Wednesday, said it had expected recent clarifications from the UAE government on home ownership to improve investor sentiment.

The new federal law passed earlier this month said foreigners buying a home in the UAE valued at more than 1 million dirhams would be eligible for a six-month renewable residency visa.

A statement issued by the Ministry of the Interior said the move underlined the government’s commitment to serving the interests of all people who view the country as “an oasis of stability and peace”.

But EFG Hermes analysts called the rules “self-destructive rather than helpful”. As a result, they have predicted that a market recovery in Dubai could happen as late as late-2011, rather than its earlier prediction of the second half of 2010.

Analysts also said property prices in Dubai were continuing to slide and were now down 35 percent since the start of 2009.

The latest study on the emirate’s real estate market added that prices were 40 percent off their peaks of 2008 while transaction values and volumes were also subdued during April.

Latest figures revealed that the total value of transactions amounted to AED31.8 billion during the first quarter of 2009, compared to AED73.4 billion in the fourth quarter of 2008 and AED110 billion in Q3 – when the property market was at its peak.

This represents a 72 percent drop off in market activity from the highs of the previous year, EFG Hermes added.

And analysts forecast that the slump in Dubai house prices would continue until they fell up to 60 percent from their 2008 highs.

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Giant Dubai developer Emaar Properties said on Monday it plans to hire 1,600 new employees despite being hard hit by the financial crisis and as thousands are losing their jobs in the emirate.

Emaar, which suffered a net loss of more than 481 million dollars in the last quarter of 2008, said it was looking to complete the recruiting process within three months, WAM state news agency reported.

It said that the new staff are needed for its retail, hospitality and entertainment divisions.

Chairman Mohammed Alabbar said that the company’s strategy aims to boost the performance of its subsidiaries in waiting for the recovery in the real estate sector, which was heavily hit by the global financial crisis, WAM reported.

Emaar’s decision bucks a trend of layoffs which saw thousands of workers, mainly in the emirate’s once-thriving construction sector, reportedly lose their jobs as finance dried up and investor confidence evaporated.

The company which is building the world’s tallest tower, Burj Dubai, still made a profit in 2008, blaming its heavy losses in the final quarter on huge US writedowns and goodwill impairment of around 735 million dollars.

Its full year profits plunged by more than half to 831.7 million dollars, compared with 1.79 billion dollars in 2007. The stock price of Emaar, the largest listed property developer in the Middle East, crashed 85 percent last year.

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