Since the last week of November 2009, and after Dubai's surprise, but badly handled announcement about Dubai World, it almost became a fashion to indulge in some Dubai Bashing. So much so that the rating agencies, for whom I have scant respect, jumped in and turned the Dubai bashing sentiment into an all out assault on the UAE. Pundits who just a year ago were queuing up for invites to the latest launch of a real estate project were suddenly become experts on who felt they have to join in the assault. I am not suggesting a conspiracy theory in the media, but simply pointing out that it seems its fashionable to run down UAE and Dubai because that is what sells newspapers. I fully admit that there are problems and yes there is a need for transparency and accountability of the situation and a great deal needs to be done to bring back confidence to the system.
However, it is deeply irritating that when the good news has come out, the bond that was the subject of such concern has been paid, and most importantly Abu Dhabi and Dubai have shown that there is a supremacy of the Federal system, resulting in the $10 billion assistance from Abu Dhabi to Dubai, all this good news is not being presented in the right light. A senior correspondent of a class A European newspaper asked me, in a rather sinister way, as to what was the price Dubai will pay for this assistance. Even though whether the assistance is a loan, or indeed an asset purchase, frankly who cares? The bottom line is a crisis has been averted, and some measure of confidence has come back to the market place.
Rating agencies have found more reasons than one to continue to make it sound like a contagion. I wonder what did they know that was new now compared to a year ago? Did they not know of the debts of Dubai World? Had they not in their review process and due dilegence with banks, when granting the ratings, discussed these issues? So they say the standstill suddenly brought home the vulnerability of the situation; it highlights how weak their research was in the first place.
It is time to look ahead now. I know that the financial system has been tested in this crisis, and more importantly the country's political will as one nation has been tested and this came through with flying colors. I have been resident here for close to 30 years, and have often spoken out about matters that have needed improvement. I have not been candid and blunt because `I am not some journalist who might want sensationalism to promote my name, but someone who really believes that in the past 38 years UAE has grown to be a fabulous place to live and work. Its a safe place, with a great infrastructure and people who have been more welcoming then others. Yes there are tons of issues that need to be resolved and this is where the focus must shift.
I was asked what was the lesson learned from this crisis.
I would say if there is one thing that is not need is a system of governance, at the Federal level, whereby debts of each of the emirates and their GRI's can be monitored. I was taken aback that Dubai World, on its own was allowed to pile on such a colossal debt, much larger than Dubai's own debt. I believe that this situation should never be allowed to happen again. I am not concerned with the politics of the situation, it is in a sense, a risk even a rich nation like UAE cannot afford to take. Indeed this crisis will pass, and I say this with knowledge and confidence that there will be support from all quarters within the country to resolve the problems of Dubai World, and there will be a clear process to ensure it never happens again.
Lenders must also be made to realize that they have to carry part of the pain in this. I asked a well known journalist who has been writing about this matter every day as to why hasn't the carelessness of the bankers been questioned in this lending? I never saw one hard hitting piece on this subject, it was almost as if only the borrower was being blamed for the excesses. I believe that while the new arrangements for Dubai World have, in the longer term created the means for the repayment of the debts to take place, there is a need for bankers and bond holders to also agree to a restructured debt. This is the pain of lending and it is time that all parties understand this comes with the territory.
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