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.

Oman: "The lucky country" - Middle Eastern Version

I know.

Sometimes I'm thought of as being too 'negative' here at Muscat Confidential.



It's sometimes said(*) that we discuss things that are better not talked about in public, especially in the context of so-called Omani 'Society' and 'culture'.

That the Undercover Dragon is all criticism and 'bad news', rather than being uplifting, supportive, and celebratory of all the many multitudes of great and good things evident here in our Sultanate by the gulf and the Indian Ocean.

True.

Why is that?

Well, for one, the mainstream press in Oman already seem to cover pretty comprehensively the "sunshine, rainbows and pretty white unicorns that crap butterflies" slant on our life and times.

Artists rendition: The average Oman media story.


I'm trying for more of a niche outside that. One thyat is less paternalistic in what Omanis can handle being talked about.

Second, there are a few stories that 'broke' here, and I like to think that there are some opinions, stories and facts available at Muscat Confidential that you won't read anywhere else, and yet are either public domain or should be. (eg Blue City, the Government's performance).

Yes, I'm often guilty of giving some relatively innocuous stories the 'tabloid treatment' in the name of entertainment. Mea Culpa. (I do wish Rupert Murdock would by 'The Tribune' and get us better served in that department too.). And no, I don't mind being occasionally offensive/one-eyed/agent provocateur, which is sometimes a disadvantage.

Lastly I am philosophically wedded to the idea that transparency, debate, and criticism is good for us. It's not about blame. It's about being better. Learning. Finding out who is right through discussion and (preferably) facts and data. Making decisions based on agreed aims, and measuring the effectiveness of what we achieve compared to those aims.





I refuse to think anyone wants an Oman filled with North Korean proles just doing what someone tells them.

BUT, for the record.

Oman is an awesome place to live. That's why I live here.

Oman has proved to be 'the exception that proves the rule' with respect to Government.

Benign Dictatorship is widely acknowledged to be the best system of Government yet devised. But the instability and side effects generally mean it's unattainable. No one has yet figured out how to end up like Oman (with a brilliant and dedicated leader in His Majesty), or perhaps Singapore, and avoid ending up instead with leaders like North Korea or Zimbabwe (or the many other examples I'm sure you can come up with).

The Omani people are the most polite, friendly, optimistic, honest, nicest people in the entire GCC and wider region. The population is blessed with a significant % of hard working, talented people (especially the women). The country is awash with potential: sea, beaches, mountains, oil and gas, minerals, fisheries, farm land, islands, trade routes, a culture of tolerance, and low levels of corruption. You have been fantastically blessed with HM and his able assistants such as HE Mr. Macki. We just need everyone else to strive to reach those benchmarks.

I love Oman.

Cheers,
Dragon


* I attend the odd dinner party. I confess it's always interesting when the topic of 'Who IS Muscat Confidential?' comes up, as it occasionally does... I usually suggest someone else, obviously.

Lessons from Dubai.

Following the BBC Panorama broadcast yesterday, on the shame that is Dubai's horrific treatment of migrant construction labour, my attention has been drawn to the recent Independent Newspaper articles [thanks Willie!] and various UAE blog posts.

Links/exerpts are at the end of this post.




Thankfully, here in sunny Muscat we mostly avoided the excesses of the UAE's Sin City. Now, the Dubai experience dealing with the aftermath of their excesses should provide a dramatic lesson for Oman on many fronts: real estate, environment, expats, bankrupcy law, debt, tourists, wealth, Government, and the old adage: "If it seems too good to be true, it usually is".

Take the status of their housing development market, with Arabian Business reporting that 70% of expat owned real estate in the UAE is in 'negative equity', with swathes of buildings incomplete and likely to stay that way. Not to mention the ridiculous excesses exemplified by the Atlantis Hotel, Burj, and The World's empty artificial islands.

Recently, too many Omani had come to believe (like many around the world) that the way to wealth was easy: through speculation in shares, property and land; by being allowed to be a minority partner in some Government development; by being Mr.5% for some foreign company; or by effectively taxing the income stream of the expats you could sponsor. Money was swilling around the country as oil prices exploded and the Government spent large on big industrial and oil infrastructure projects.

Perhaps now there can be a return to sensibility: That wealth should be gained through professionalism, hard work and true value creation. That education is important because of the skills and knowledge it brings and not because it is supposed to provide a magic piece of paper that gives an automatic right to sit behind a desk reading the papers all day. That borrowing beyond your means to consume and speculate is unwise. And to be wary of hubris.

And that just because others have treated people horribly and inhumanely in the past [USA - slaves, UK - Indians, Japan - Koreans], or still do so now [China - Tibet, Pakistan, Dubai - NRIs ...], doesn't make it OK for us to do the same. Truthfully decribing a criticism as hypocritical doesn't mean the criticism isn't true. We can and should be better than that.

An expat minimum wage and enforcement of decent terms and conditions is needed here urgently, not just because it's humane, but because we have to meet the number 1 challenge of this country - unemployment/under employment and a huge ratio of under 18 to working age people. Aluminium plants may be another cleaver way to export artifially cheap gas, but they don't actually provide jobs for very many people.

Oman must convert itself from an economy based on industrialisation, hydrocarbons and cheap labour to a service based economy with Omanis serving Omanis, and doing so with efficiency and professionalism (Government included). Having an endless supply of cheap, low-skill imported labour halts the effective Omanisation of the service industry, and legislating 'job types' or compulsory Omanisation % is highly inefficient and ineffective.

The comments section on the Johann Hari OpEd piece is a story in itself, and generally binary (either totally disagree/totally agree]. The emotion, vitriol and back story evident in some of the comments made is incredible. Especially defensive are those comments from Emirati and Dubai western expats, who are somewhat pilloried in the article.

Check these links out.

The Desert Blogger.

The strange world of Middle East media:

The Panorama appreciation society
Posted by desert_blogger
Monday, 6 April 2009 at 06:55 pm

It can de difficult to express just how frustrating it is, now and again, to be a journalist in a region that lacks so many basic facets of personal liberty. I'm both deliriously happy, and a little ashamed, to read the synopsis of Panorama: Slumdogs and Millionaires, which will be screened by the BBC in the UK in two hours time, for the highly respected, international current affairs show has chosen to gather its tanks on the lawns of Dubai's migrant labour market.

I'm happy, because, like hundreds of thousands across Dubai, I walk in the shadows of the labourers from the Indian sub-continent (almost) everyday, and while I can't begin to claim to know their way of life, I know of the impossible situation that these men face. I know of their exploitation, while being acutely aware of the glamorous reputation that Dubai manages to convey on the world stage - what Panorama's Ben Anderson calls, "one of the greatest PR triumphs of the past 20 years."

And this too is the source of my shame. As a journalist in Dubai predominantly covering the construction industry, should it not be my job to write the story that Ben Anderson will have the privilege of telling in two hours time? Well, yes, it is. So do we? Well, yes, we do.

Last July, I wrote and we published this article, passionately supportive of the introduction of a minimum wage for Dubai's oversea's labour force. ...

And yesterday a long, 9000 word article by Johann Hari in Independent: Comment has been drawing lots of attention in the UAE bloggosphere, either attacked as a biased hatchet job, or praised as an honest view of the real and deep problems of the giant fake plastic Ponzi-scheme built on the bones of exploited NRIs and a sea of sewerage that is Dubai, or perhaps more reasonably a bit of both. But its a nice (albeit one-sided) story, apparently full of actual interviews and quotes.

The dark side of Dubai

Dubai was meant to be a Middle-Eastern Shangri-La, a glittering monument to Arab enterprise and western capitalism. But as hard times arrive in the city state that rose from the desert sands, an uglier story is emerging. Johann Hari reports...

...

I say. I can't stand it. She sighs with relief and says: "This is the most terrible place! I hate it! I was here for months before I realised – everything in Dubai is fake. Everything you see. The trees are fake, the workers' contracts are fake, the islands are fake, the smiles are fake – even the water is fake!" But she is trapped, she says. She got into debt to come here, and she is stuck for three years: an old story now. "I think Dubai is like an oasis. It is an illusion, not real. You think you have seen water in the distance, but you get close and you only get a mouthful of sand."

As she says this, another customer enters. She forces her face into the broad, empty Dubai smile and says: "And how may I help you tonight, sir?"

And the new UAE media law is a worry. We always knew recession and unemployment leads to fascism I guess...
MiddleEast Blog

...
The government has already taken steps to control media coverage of the crisis with a new draft media law, which would make it a criminal offence to “damage the country’s reputation or economy”. The new law could see those reporting about the crisis faced with fines of up to 1 million dirhams (around £190,000).

Last month Humaid bin Dimas, a spokesman for Dubai’s Labor Ministry, refused to confirm, deny or comment on local newspaper reports that 1,500 work visas were being cancelled every day.

“At the moment there is a readiness to believe the worst,” said Simon Williams, HSBC bank’s chief economist in Dubai. “And the limits on data make it difficult to counter the rumours.”