The glitz may be fading on a Middle East gem. Last month Dubai’s ruler, Sheikh Mohammed bin Rashid al Maktoum, merged his two main investment vehicles in an effort to slash costs. The move came just days before the emirate, struggling under the weight of the global financial crisis, received a $10 billion emergency loan from neighboring Abu Dhabi. Still, combining Dubai Group, which has $40 billion in estimated assets in the Middle East, with the ruler’s global investment operation, the $11.5 billion-in-assets Dubai International Capital, does little to address questions concerning the financial health of the Sheikh’s operations.

Those questions are likely to bedevil the merged group, particularly if it tries to restructure its combined debt of $5.3 billion, of which about half falls due over the next 15 months. Dubai Group and DIC are part of the more opaque Dubai Holding Group, which includes the Sheikh’s infrastructure, real estate and investment holdings and is overseen by chairman Mohammed Al Gergawi. Dubai Holding’s overall debt is a mystery.

It is also unclear if the $10 billion bailout will be used to refinance a privately controlled vehicle such as Dubai Holding. “What Dubai Holding really needs is greater transparency,” says Fahd Iqbal, a strategist at investment bank EFG-Hermes in Dubai. If the balance sheet turns out to be well funded, the news could push down borrowing costs and potentially boost margins for the group a lot more than a merger will.