November 30th, 2009
08:39 PM GMT
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It has almost become legend in London Underground parlance, “mind the gap”, meaning that commuters should move with caution as they enter the train to avoid an accident on the platform.

This phrase “mind the gap” applies as well with what we are dealing with in Dubai and the UAE overall. Comments, many complain, have tended to be either inconsistent on the one hand or contradictory on the other.

That again was the experience in the last 48 hours, when the central bank of the UAE said it would offer liquidity to the banking system to all domestic and foreign banks with operations in the Emirates. The move was designed to avoid a run on institutions by depositors and guarantee there are ample funds available if the need arises. It went over well and indeed there was no panic.

Twenty-four hours later, we were on the receiving end of a statement by a hitherto unknown official from the Dubai Department of Finance Abudulrahman al Saleh who said the investors and lenders may have to shoulder the responsibility of their actions.

To be precise, he noted that Dubai World “was set up on a commercial basis and not guaranteed by the government.” The statement was crystal clear, that buyers or in this case lenders should beware. Nothing wrong with that approach if it is telegraphed in advance, but in this case -– having spoken to a number of bankers and others involved in the process –- it was not. This, one London veteran of the Middle East said, “is not the way to rebuild confidence.”

When covering the region one learns to put various pieces of the puzzle together by working the phones, talking face-to-face over a coffee and then completing the picture. In this instance we are not there yet. Some would contend we are still a way off.

The chairman of the Supreme Fiscal Committee of Dubai and Chairman of Emirates Airlines, Sheikh Ahmed bin Saeed al Maktoum is the man calling the shots right now as he and his team comb through the assets of Dubai World and the other “Dubai Inc.” entities. The people I spoke to over the last 72 hours expect more clarity by Wednesday.

In the meantime, bankers who have lent an estimated $123 billion to the UAE overall, 70 percent of that from European banks, might feel they too need to mind the gap.

soundoff (12 Responses)
  1. James

    I would like to have a list of banks and other institutions in the USA that have loaned taxpayers money or insured loans to Dubai. And how much they loaned, if they did.

    December 1, 2009 at 3:02 am |
  2. david

    I think the Dubai issue has been overly exaggerated, in the end Dubai is part of the UAE, one of the richest countries in the world with a mega sovereign wealth fund in excess of $900B, Dubai has succeeded in building one of the most dynamic economies in the Middle East and Abu Dhabi won't not let Dubai go under there are just assessing the situation, and analyzing the asset bases of Nakheel and Dubai World in order to present a viable solution.

    December 1, 2009 at 8:00 pm |
  3. basel

    dubai will be fine! smart people! GOD Bless dubai, all the expatriates living in dubai would never want to leave that place! to al the haters- dubai will overcome the crises.

    December 3, 2009 at 11:41 pm |
  4. Alex

    James above seems to have US public finances problems back-to-front. America is a borrower, its budget and taxpayers borrow too much, it doesn't lend too much.

    December 4, 2009 at 9:49 am |
  5. abdu faraji

    So much of the developing world in Latin America , Asia , and Africa have
    capacity to consume productively , for the better of humanity as a whole
    including the Arabs themselves , if only 20% of what is going under there
    now was wisely invested in those countries . But alas , Nations are as
    selfish as Individuals !
    Perhaps they should teach their children the History of the Greeks , the
    Romans and the Ottoman Emperior Wealths , and where are those state
    today ? Mega Sovereign Wealth of $ 900 B.could evaporate in 5 yrs if the
    the World Economy is destabalised , and oil is not an everlasting asset .

    December 4, 2009 at 7:31 pm |
  6. Francis Arif

    Think David is right because UAE cannot afford to let one of its member Emirates down at this critical time when the World Economy is going through the adjustments. Arab Economies are somehow allergic to shocks because of its inbuilt family ownership structure of the economy and Dubai is no exception. Dubai may loose its emerging position to its sister cities but in the long run it may remain the best place to work and live in the Middle East.

    December 5, 2009 at 3:01 am |
  7. Dr. Douglas Fineberg

    With more than 20 years in investment banking & M&A in the region, I find it curious that no one has made the connection between the slowed pace by Emaar in its due diligence of the value of the assets and liabilities to be transfered in its merger (proposed) with Dubai Properties.

    When announced, it seemed curious that the Dubai Properties side expected a closing on or before November 15, 2009; an almost impossibility given that virtually no transparency exists in DP and the vast majority of its assets are land whose value is subject to conjecture.

    Mohammad Alabar (Emaar Chairman) moved cautiously in the process – apparently to the consternation of Sheikh Mohammad and his caution caused the process to move well past the original mid November closing date.

    HERE IS MY POINT: if the merger had closed before the Eid holiday, a substantial portion of DP debt would be the responsibility of Emaar – an entity traded on the DFM. Without the closing, the entire borrowing of more than $80B – lead by the $3.4B Sukuk – put Sheikh Mohammad in the position of taking the prudent choice (at least from the standpoint of the Al Nahyan family in Abu Dhabi) and demanding the standstill.

    I also note that NO MENTION of the stand stills' impact on the Emaar / DP merger has been stated??

    December 5, 2009 at 10:48 am |
  8. elgee

    Dubai is on denial. they know that billions of money poured into property development is borrowed money. 80% of populations in dubai are expatriates and majority of homebuyers during the boom are foreigners. Banks stops lending, foreign buyers left the country, I will not be surprised if dubai properties prices will collapse not too long from now and you will find more number of units than its local population.

    What a waste, uae is not like london, new york & hongkong a stable part of this world where business flows since over 100 yrs

    Dubai is fragile.... no protection for expats and laws changes.

    December 8, 2009 at 1:18 pm |
  9. fahad

    I think this issue has been exadurated. Its in the interest of all to give Dubai the needed time to rearrange its obligation. It gona be back sooner that one thinks. Dubai is the best place in the reigon for forieners and this negative propaganda is not just fare.

    December 10, 2009 at 2:17 pm |
  10. John Ca.

    Dubai needs to sell more oil and buy more U. S. Dollars?

    December 10, 2009 at 11:38 pm |
  11. david

    Dubai is a modern day Sodom. Expats living their have their heads in the sand and have no idea of the terrorist cells, prostitution rings and other disgusting behavior that goes on there. Have u seen how migrant workers are treated. All the expats see are the flashy shopping malls and nice cars. The fall of Dubai would be fitting but not likely...

    December 14, 2009 at 12:53 am |
  12. ovees

    The merger was going to happen between emaar and dubai holding( which is a huge conglomerate like DP world but not DP world)

    However, the merger has been called off, which is good news for emaar

    December 15, 2009 at 8:21 pm |

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