VZCZCXYZ0000
RR RUEHWEB

DE RUEHDE #0034/01 0260941
ZNR UUUUU ZZH
R 260919Z JAN 10
FM AMCONSUL DUBAI
TO RUEHC/SECSTATE WASHDC 0048
INFO GULF COOPERATION COUNCIL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS DUBAI 000034 
 
SENSITIVE 
SIPDIS 
DEPARTMENT FOR NEA/ARP, MCGOVERN 
COMMERCE FOR ITA/MAC, LOUSTAUNAU AND SAMS 
 
E.O. 12958: N/A 
TAGS: EFIN ETRD ECON PGOV AE
SUBJECT: U.S. Companies Seek Overdue Payment in Dubai 
 
REF: 09 Dubai 457; 09 Dubai 533; 09 Dubai 545 
 
¶1.  (SBU) Summary:  Following months of advocacy by the Consul 
General and FCS, some Dubai government-linked companies have begun 
initial steps to address outstanding payments owed to U.S. 
companies that provided services and delivered on projects during 
Dubai's property boom.  Dubai Holding, a conglomerate of real 
estate development companies funded with seed money from the 
personal wealth of Dubai Ruler Mohamed bin Rashid al Maktoum, is 
appointing negotiators to engage U.S. companies owed an estimated 
40 million dollars for services rendered.  This effort is in line 
with recent comments by senior Dubai officials committing to 
include payments to contractors as the Emirate addresses its 
ongoing debt and financial crisis.  These developments are welcome 
and will have a positive impact on the U.S. business community 
here, but are not comprehensive.  A number of other Dubai linked 
entities that owe money to contractors have yet to match the steps 
taken by Dubai Holding.  End Summary. 
 
 
 
¶2. (SBU) Dubai is a regional hub for hundreds of U.S. companies, 
viewed as a conducive point from which to exploit lucrative markets 
of the GCC and further afield.  When the Emirate went on a 
debt-fuelled building boom beginning in 2004, a number of U.S. 
companies in the architecture, construction and engineering sectors 
played a role and enjoyed hugely lucrative opportunities.  But when 
Dubai's real estate sector crashed in late 2008, many of these same 
U.S. companies were left hanging, facing effectively bankrupt 
developers unable to pay for services rendered.  This issue has 
emerged as a principal challenge facing the U.S. business community 
in Dubai and a top commercial priority for Consulate General Dubai 
(ref a).  Dubai FCS has collected voluntary data on outstanding 
payments from a number of U.S. companies impacted and has used that 
data to press senior Dubai leadership for timely payment.  At the 
request of the companies themselves, and in keeping with local 
custom, discretion and confidentiality have marked these 
discussions.  U.S. companies are not alone in facing payment 
difficulties; post's strategy has been to position U.S. companies 
to benefit first once repayment begins. 
 
 
 
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Dubai Leaders Acknowledge Pending Contractor Payments 
 
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¶3. (SBU) In a December 14 statement announcing the Emirate of 
Dubai's receipt of USD 10 billion in support from Abu Dhabi to 
address the debt obligations of government-linked company Dubai 
World (ref b), Shaykh Ahmad bin Saeed al Maktoum, Chairman of the 
Dubai Supreme Fiscal Committee, said that the Government of Dubai 
would apply a portion of the Abu Dhabi funds "for the satisfaction 
of obligations to existing trade creditors and contractors." 
Shaykh Ahmad's statement added, "discussions with affected 
contractors will begin in short order."  This language was viewed 
by unpaid companies as a sign that the Dubai government understood 
that obligations to unpaid contractors would be a key factor in the 
restoration of Dubai's business-friendly reputation.   Later, in a 
December 16 meeting with Assistant Secretary of Treasury Baukol 
(ref c), Marwan Abedin, Chairman of the Dubai Support Fund, a unit 
established to provide government support to companies negatively 
impacted by the economic downturn, indicated that payments to 
contractors was a priority of the Government in its management of 
the debt crisis.  The Dubai Government, he said, understood that it 
had obligations to contractors owed money by companies such as 
those within Dubai Holding, and would meet those obligations. 
 
 
 
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Dubai Holding Takes Steps to Address Unpaid Bills 
 
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¶4. (SBU)  In November and December 2009 meetings, Dubai Holding CEO 
Ahmad bin Byat discussed the issue of unpaid bills of U.S. 
contractors with the Consul General and FCS Officer, who provided a 
detailed breakdown of money owed by Dubai Holding to U.S. 
companies.  The FCS-developed spreadsheet pertaining to Dubai 
Holding shows an estimated total of nearly USD 40 million in 
outstanding payment.  (Note:  The spreadsheet represents only the 
information impacted companies have voluntarily provided us; some 
companies have not responded to our requests, so the total may 
actually be higher than 40 million dollars.  End Note.)  Following 
these meetings, Bin Byat appointed Khalid Al Malik, Group CEO of 
Dubai Properties to look into the non-payment issue.   In a 
follow-up meeting with FCS Officer on December 30, 2009, Al Malik 
provided a four stage matrix of 17 projects for which payments were 
owed to U.S. companies.  Al Malik had labeled the projects as: Blue 
(agreed MOU with the U.S. firm); Green (Dubai Properties data 
collection complete); Yellow (assessment in process), and Orange 
(collecting data on invoices).   Al Malik stated that his goal was 
to conclude settlements with all of the U.S. firms on the list by 
the end of the first quarter, 2010.  Al Malik welcomed additional 
input from FCS regarding newly identified claims and tagged Arif 
Mubarak, COO of Dubai Properties Group, as the day-to-day POC. 
 
 
 
¶5. (SBU)  FCS followed-up with both companies listed as "blue"  in 
the Dubai Properties matrix, indicating a signed MOU and agreed 
payment schedule to confirm accuracy of the information: 
architecture firm Burt Hill and engineering firm R.G. Vanderweil. 
Burt Hill confirmed the MOU and that it is receiving one million 
AED per month (USD 270,000) on a project payment settlement that 
began in late November 2009.  The firm said that discounts were not 
required or requested on the agreed invoices, unlike the thirty 
percent discounts reportedly demanded of contractors by the 
indebted company Nakheel.  Non-approved invoices, however, are to 
be negotiated case-by-case, and will likely require discounts and 
extended payment schedules.  In its conversations with other 
impacted companies, Burt Hill told FCS Officer, it recommends 
companies agree to receipt of a reduced amount on non-approved 
invoices in order to quickly establish cash flow rather than 
holding out for full amounts, a tactic that could result in 
companies being dropped to the bottom of the repayment list.  R. G. 
Vanderweil similarly confirmed an MOU in place with Dubai Holding 
and indicated payment will begin soon.  FCS also confirmed that the 
two U.S. firms with the largest outstanding balances with Sama 
Dubai (another of the Dubai Holding property developers) have also 
been contacted in recent weeks to conduct further discussions on 
invoices. 
 
 
 
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Repayment Not Universal 
 
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¶6. (SBU) The positive steps undertaken by Dubai Holding have not 
been matched by other Dubai controlled or linked entities. 
Dubai-based mega developers Nakheel, Emaar and Meraas each 
maintains a long list of unpaid contractors and have not undertaken 
the same kind of direct action seen recently from Dubai Holding. 
And the situation is even worse for unpaid contractors attempting 
to gain traction with truly private developers with no link to the 
government, such as Omniyat or Union Properties, two high flying 
companies now mired in debt problems.  On the other hand, Dubai's 
Road and Transport Authority (RTA), notably reported to owe one 
U.S. engineering and construction firm over 200 million dollars in 
overdue contract payments, has recently begun to make back 
payments, albeit only a fraction of the owed amount, according to 
the company.  RTA also recently announced a plan to spend up to 3 
billion dollars in infrastructure-related stimulus in 2010 on roads 
and its metro transport system. 
 
 
 
¶6. (SBU)  Comment:  The public acknowledgement by senior Dubai 
government officials of the need to meet obligations to contractors 
and the recent moves by Dubai Holding to undertake steps towards 
payment are positive signs.  Consul General and FCS will remain 
 
engaged on this issue, working with impacted U.S. companies and 
leadership of government-linked property developers towards 
favorable outcomes.   End Comment. 
SIBERELL