NICOSIA: Dubai's ambitions to become an international financial centre are in doubt after the shock announcement that its main state-owned firm wants to suspend debt payments, analysts said on Sunday.

"What happens next and, more pertinently, how critical decisions are disclosed will cement its continuing credibility and its place as a financial centre," said Cubillas Ding, senior analyst at Celent research and consultancy group.

"Dubai's untested financial legal system is now facing its first real test in relation to how it deals with the international community. No one wants to play in a playground where the rules are unclear," he said.

Dubai International Financial Centre, a 110-acre (44.5 hectare) free trade zone which opened in 2004, prides itself on its website as "the world's fastest growing international financial centre."

And "it aims to develop the same stature as New York, London and Hong Kong."

Among businesses based there are the local stock exchange Dubai Financial Market and international sister market Nasdaq Dubai.Related article: Dubai dream turns to nightmare

Borse Dubai, majority shareholder in both operations, also holds 22 percent in the London Stock Exchange and 19.9 percent in Nasdaq OMX, owner of New York's mighty Nasdaq exchange and several stock markets in European countries.

"As the world economy goes through fundamental change and realignment, DIFC is poised to emerge as a major global player in the coming years," David Eldon, chairman of the DIFC authority, said at celebrations this month to mark the fifth anniversary of the centre's launch.

The DIFC said at that time, without giving details, that the business cluster in its financial district had registered an annual growth rate of 127 percent.

But the performance of the DFM Index, the main indicator for the emirate's stock market, tells a different story.

It peaked above 6,000 points two years ago then began to fall, tumbling sharply during the global credit crunch late last year and dropping below 1,500 points.

It closed its latest trading day on Wednesday at 2,070.89, up more than 40 percent from the start of the year but still down by two-thirds from its all-time high.

Dubai authorities chose the evening before the start of a four-day holiday for the Muslim festival of Eid al-Adha to make the shock announcement that its massive Dubai World holding company wants to suspend debt payments for six months pending a restructuring of the conglomerate.

The loss of confidence in Dubai by international investors was compounded by the difficulty of obtaining information about what Dubai plans to do to resolve the debt crisis.

"The predictability of decision-making processes and the lead up to decisions is a major concern," Celent's Ding said. "Transparency is important. With the manner the sequence of events has been managed, this has not been forthcoming."

The contract most directly affected by the moratorium is the redemption due in December of a 3.5-billion-dollar (2.9-billion-euro) Islamic bond issued by Dubai World construction business Nakheel, the company behind Dubai's iconic Palm Jumeirah tree-shaped artificial island.

Dubai has an estimated debt mountain of 80 billion dollars, as large as the emirate's entire gross domestic product. Dubai World's group debt of 59 billion dollars comprises three-quarters of the total.

Sheikh Ahmed bin Saeed al-Maktoum, head of Dubai's Supreme Fiscal Committee, issued a statement on Thursday seeking to reassure investors.

"The government is spearheading the restructuring of this commercial operation in the full knowledge of how the markets would react. We understand the concerns of the market and the creditors in particular," he said.

"Further information will be made available early next week."

But the lack of detail merely served to alarm investors further.

Kit Juckes, at London-based currency trading group ECU, said: "To my mind, (he) simply fails to answer any of the questions the market is asking.

"Everyone will speculate about whether the request to re-schedule debt will succeed or lead to default, what other Dubai-based entities could suffer a similar fate, whether it could prove more widely contagious and which banks globally are most exposed."

Oliver Bell of Swiss bank Pictet thinks the Dubai World crisis is a "disaster" for Middle East and North Africa equity markets that will trigger a big sell-off, he told the UK's Citywire financial news website.

When news of Dubai World's problems first broke, he "hoped it was a miscommunication," but Sheikh Ahmed's statement confirmed Bell's worst fears.

"This was more alarming as it suggests it has been carefully planned and they knew markets would be very concerned. Now we are in a vacuum of no news again," he said.

"If all news stays as it is, the UAE market will sell off very sharply when it reopens (on Monday) after the Eid" holidays, Citywire quoted him as saying.