Dubai’s not immune
We’ve been waiting for a straight answer about where Dubai stands in the global financial mess,..we finally got it.
November 27, 2008 12:00 by kippreport
There isn’t anything more damaging to investors’ confidence than uncertainty. For weeks, the media (including Kipp) speculated the effect the crisis will have on the emirate, although we didn’t have straight answers as to whether Dubai had been affected by the crisis.
This week, however, the local media has finally been given more information. We may not have been showered with tables, graphs and statistics, but we’ve been given figures, like Dubai’s $80 billion. More importantly, however, we’ve been told, flat out, that because Dubai is invariably connected to the world economy, it, like any other major hub around the world, has been affected by the credit crunch.
Speaking at a one-day conference titled The Inside Track on Dubai on November 26, David Eldon, chairman of the Dubai International Financial Centre Authority (DIFC Authority) said it best: those who believe Dubai is immune from the financial meltdown are “consigned to the fantasy file […]All economies are being affected by the global downturn, including Dubai.”
Eldon insisted that while Dubai’s economy will be affected, it won’t be crippled: “The reality is that Dubai is not built just on credit. Dubai’s growth in the past has been largely equity-financed rather than debt-financed,” he said.
He went on to explain that “Dubai’s debt is also very different from the indebtedness seen in markets like the United States. Debt there has done to finance deficit spending and increased consumption. Debt here has been largely channeled into financing infrastructure and public facilities – investments that will be self-repaying, investments that increase productive capacity and enhance productivity growth.”
The bottom line is that Dubai cannot insulate itself from the crisis; and just like that, the uncertainty is gone. All it took was a little transparency.
There are still questions about how badly affected Dubai has been, and whether its mega-development plans are viable. For now, however, getting the government to admit there’s a problem is good enough. –DB