Expats could shield Dubai from bust – Nick Leeson

Rogue trader who brought down Britain’s Barings bank says that Dubai’s reliance on expats reinforces financial system

Dubai’s reliance on expatriate expertise could help shield the emirate’s financial system from any future bust, according to rogue trader Nick Leeson, as economic growth and a rebounding property market fuel speculation of a new boom in the emirate.

Real estate prices have soared by as much 30 percent in the last year, prompting some analysts to raise concerns that Dubai could be entering a bubble similar to that which precipitated the 2008-2009 financial crisis in the glitzy Gulf emirate.

Leeson, the futures trader whose actions bankrupted 230-year old Barings bank in 1995, warned that Dubai’s financial system must have adequate checks and balances in place to ensure that history does not repeat itself.

“It’s a cycle - it’s a boom and bust. If you’re going through the boom again like you are at the moment you have to be a little bit worried. It’s important that there are adequate controls in place,” Leeson told Arabian Business. “Wherever there’s a growing economy there’s a certain element of risk involved.”

Leeson spent more than three-and-a-half years in a Singapore jail, before being released following a colon cancer diagnosis. He has since rebuilt his life in Ireland, where he works as an executive for a restructuring company.

Leeson said that Dubai was unlikely to experience any financial crises on the magnitude of those seen by Ireland and Iceland in recent years, due to its reliance on foreign expertise. “The one thing that’s slightly different about Dubai, if you were to contrast it with, say, Iceland many years ago, is that a lot of the experience and expertise in Dubai is brought in from other locations, be that the UK or the US, Australia, or wherever,” he said. “That’s a good thing because they’re bringing a compliment of skills.”

The Irish economy collapsed in 2008 after excessive foreign borrowing to fuel a real estate boom, while all three of Iceland’s major private banks folded in the same year after they failed to re-finance short-term debt.

“In Iceland, the risk managers were homegrown and slow to evolve and adapt. You had an economy that was growing at a massive rate, but they didn’t have the expertise or the experience to deal with at. Dubai may be different, but you do worry,” Leeson said.

Join the Discussion

Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

NOTE: Comments posted on arabianbusiness.com may be printed in the magazine Arabian Business

Please post responsibly. Commenter Rules

Posted by: Nelly

I think the journalist Daniel Shane means preceded and not... "bubble similar to that which precipitated the 2008-2009 financial crisis"! #proofreading

Posted by: Rupert Neil Bumfrey

Oh dear, a voice from outside, making comparisons with Ireland and Iceland about Dubai.

My view, for what it is worth, possibly a farthing, is that much of the turmoil from 2008 onwards was very much caused by Expat Experts who were drafted in, from early noughties, and when confronted with an open cheque book splurged and leveraged with little accountability, after all they were Experts.

Would Dubai have become embroiled in Las Vegas without such knowledgeable Experts?

How many of the US investments they initiated have been positive in their returns?

Hopefully Dubai has learnt from the excesses and whilst many are crowing over the allure of the property market let's not forget it remains about 30% off the highs, so my original suggestion that 2015 would be the year for positive returns remains fixed for me.

Possibly Leeson is looking to enhance his rebuilt career as a restructurer in Dubai!

Posted by: leo50

you possibly over-estimate the worth of your view..However I agree with many of your points:)

Posted by: Mick

Until they tell us "if you don't like it go home"

Posted by: The Consultant

I am not sure that the man whose fraudulent actions brought down Barings Bank is the best person to be giving advice on avoiding financial collapse.

In any case, his analysis misses one essential point, which is obvious to anyone who was in Dubai during the 2008 crisis: when things start to go wrong expat employees get laid off and expat investors pull out. This withdrawal of capital and population exacerbates the effects of the slowdown, so I wouldn't be relying on expats to "shield" Dubai from a bust, on the contrary you get more stability in a country with a permanent population and safety nets such as unemployment benefit.

All comments are subject to approval before appearing

Further reading

Features & Analysis
First bank merger in 20 years sets Saudi Arabia up for more deals

First bank merger in 20 years sets Saudi Arabia up for more deals

Q&A look at what the planned merger of HSBC and RBS’s Saudi ventures...

A natural move: How Dubai Chamber is strengthening its ties in Latin America

A natural move: How Dubai Chamber is strengthening its ties in Latin America

With vast resources and more than half-a-billion people, the...

If Saudi future's so bright, why can't these banks find buyers?

If Saudi future's so bright, why can't these banks find buyers?

No big-name global banks eager to buy stakes in Saudi banks,...

Most Discussed