Dubai in Denial over debt problems - how unusual

No local news of real note as we all struggle to clear our inboxes after the 9 day public holiday.

I was disappointed that Essa, in his typically insightful and hard-hitting anti-Zionist-state opinion piece in the Times of Oman this week, failed to even mention the meeting Omani Officials had with the Israeli Foreign Ministry chaps (well publicised by the Israelis). Ah well. Our guys were probably just being polite.

But Dubai continues to play out in the news cycle. Those committed to Dubai, not surprisingly, are whining about how unfair the world/western media are portraying their situation.





I thought the article in The New Yorker summed it up quite nicely.

The rejection of the criticism, and the style of the reaction and rejection, is typical of the regional attitude to criticism. First response is abject denial, followed by defensive attacks that it's all someone else's fault (typically USA, "The West", Israel, UK, et al), and that it's all anyhow a great thing and that it's much worse somewhere - anywhere - else.

LMAOFOFL

For the record:
- yes, Dubai has some core businesses that are real [Jebel Ali, Shipping, Emirates, tourism, regional logistics, and misc other stuff] and unfortunately their real value is no-where near enough to cover or even service the debt.
- Dubai is still better than most places in the region as a place to live if you have a bit of cash and skills & ambition. Especially if your only other options are Mumbai, Tehran, or Cairo.
- Abu Dhabi has more than enough cash (even now) to bail out Dubai 5 times over.
- The rest of the Dubai economy is mostly hype and foolishness: creating islands of sand in a place full of sand and empty land; Building an artificial winter ski resort in the desert; importing all your consumables (food, clothes, cars, whiteware, electronics, gas...), importing everything else too (money, talent, real workers) and desalinating all your water; the whole Ponzi scheme of the real estate boom, and the huge inverted pyramid that was based upon it - all the real estate sellers, marketers, bumpf publishers, shwag makers, and the restaurants and bars and schools and shopping centres they all spent their money in.
- and it was all based on limitless underpaid workers, willing to come to Dubai to scrape a living 24/7 slaving for the Emirati because even that hell was 1000% better than what they had or were ever going to get in India/Pakistan/Afganistan/Bangladesh...

As we now know, that money was (and still is) pretty much all borrowed, borrowed in the hope that by the time the bust came (if ever) everything would have reached a self fulfilling virtuous circle and enough real value creation and loose money attraction would have been accomplished to pay the interest rates.

And I have precious little sympathy for those who lent it to them. They should have known better. And while it flowed (for the money was not really theirs either, but borrowed from depositors) they too got their commissions and business class and expenses and big bonuses.

And when the vast river of cheap borrowed cash was flowing, everybody else stuck an oar in too, from the ruling family on down. The graft was (and is) everywhere. After all, there was enough money for everybody! Yeehah! Party!!! (hey maybe everyone was just snorting coke all the time...)

And stupid things got built, too many stupid things. A lot of the infrastructure and buildings are also not of the highest international standards, as it was pretty much all built by poor manual labour from the sub-continent. Slap-dash, no standards or enforcement, all bog-it and leg-it.

But I still love a lot of what is Dubai, just to visit: the Dubai 7s, the bars, the nice bits (if you have cash), the glamour, the girls, the pace, the pure self induced hedonistic hallucination of it all.

But talk about a bad case of denial.

DUBAI IN DEBT
Posted by Ian Parker
When I was in Reykjavik this time last year, Icelandic reaction to the the country’s economic disaster was mixed—grief, fury, a kind of giddiness—but nobody was pretending that nothing had happened. Last Wednesday, Dubai asked to be excused six months of payments on a debt of fifty-nine billion dollars owned by Dubai World, the state-backed conglomerate. Yesterday, Dubai’s stocks fell 7.3 per cent; today they fell another 5.6 per cent. And the Gulf News, an English-language Dubai newspaper, has reported this online with the headline: “UAE markets bounce back at the end of trading sessions.” Another story, quoting Sheikh Mohammad bin Rashid al-Maktoum, Dubai’s leader, is headed: “World lacks understanding of Dubai debt crisis.”

Only Icelanders were embarrassed by Iceland’s financial collapse. In Dubai, something more than national pride is at stake, and one wonders how far disappointment could stiffen into denial. (Yesterday, the Times quoted from an online forum in Dubai where someone had written: “Dubai is a victim of media distortion” and “All the Western countries have ganged up on Dubai. Why? Because it has succeeded.”) In the summer of 2005, while reporting a piece on development in Dubai, I met Sultan Ahmed bin Sulayem, chairman of Dubai World, in his office on the forty-seventh floor of the Emirates Office Tower, in a room whose carpet featured a recurring pattern of palm trees, a theme repeated in the fronds of artificial reefs, packed with villas, extending from the coastline below the window—one of his projects. He said,

Dubai broke a myth in the region. People say you cannot do this here. It can only happen in the Far East, it can only happen in Europe, it can happen in America. We cannot do it, it’s not something for the Middle East. But the way we broke that myth? We said, no, we can do anything we want. And now it gives a lot of courage to neighbors in the region, whereby they say, if Dubai can do it, we can do it.
Dubai’s reaction even to unpromising ideas, he said, was “to see how big we can make them.” At that time, one could detect a rumble of anxiety, as the city’s indoor ski-slope neared completion; you could hear a little “Glengarry” urgency in the pitches made by real estate agents in the malls. Today, Dubai may owe more than eighty billion dollars.