By Jonathan Worsley
As the world discusses Dubai's debt, Bench Events chairman Jonathan Worsley provides investors with a Londoner's perspective - and says that the desert dream is far from over.
I'm confused - and for a very good reason. If you believe what you read in the international media, Dubai is finished. It's time we pulled the plug on all the hard work and effort we have spent the last couple of decades on.
Our developments are worthless, the economy will crash (if it hasn't already) and we need to get out of there quickly, carrying as many dollars as our grubby little hands will take. Could the last one to leave please switch off the lights?
Of course, what we see in the press and what is actually happening in reality are (dare I say often?) two very different things. Take for example Rod Liddle's comments in his column for the (November 29, 2009,
), in which he says: "Dubai is wrecked but, like an old tart with a kiss-and-tell contract from the red-tops, threatens to drag the rest of us down with it." Other commentators and media outlets have also been quick to jump onto the fast-moving ‘Let's Knock Dubai' bandwagon.
And herein lies the problem, there is a tendency towards media hysteria rather than a reasoned assessment of the facts. The scale of Dubai World's debt was put at an eye-watering US $60 billion, until Deutsche Bank analysts pointed out that the debt is approximately US $25 billion.
Deutsche Bank's regional chief executive, Dr. Henry Azzam, has said that the debt crisis will "not have a major impact on the region's banking sector" and that the banking sector in the area is "solid". (
Get some perspective
Are these the words of someone who is panicking, or those of an experienced professional who looks at the long term? Azzam's sentiments have been echoed by World Bank President, Robert Zoellick, who says: "I personally think that the Dubai financial problems will be contained and manageable". Let's put this into perspective:
• When it collapsed, Lehman Brothers left more than US $600 billion in assets to administer.
• One of the world's largest capitalist institutions, Merrill Lynch, was saved from bankruptcy by a US $50 billion takeover.
• The US government effectively nationalised Fannie Mae and Freddie Mac, which between them owned or guaranteed about half of the US $12 trillion mortgage market.
• In the UK, the government's bank bailout has, so far, cost tax payers US $1.5 trillion.
So, please forgive me if I think that there is an over-reaction to the events unfolding in Dubai.
Credit where it's due though: some commentators have had a much more balanced view of the current situation.
For example, writing in the London Evening Standard (November 30, 2009,
), Anthony Hilton says that: "Last week's reaction to the announcement that Dubai World was in financial difficulties was out of all proportion to the nature of the offence. There is a recession going on, and in a recession companies default, particularly companies that have borrowed vast sums to pursue spectacular property developments."
Hilton then cites the example of London's Canary Wharf development as "a similar story of a visionary developer taking a wasteland with no infrastructure to speak of and seemingly no prospect of economic development, investing unprecedented sums in state-of-the-art buildings to turn it into a model environment, and then waiting and hoping for the tenants to arrive." Canary Wharf is now a hugely successful development and the heart of London's financial district.
Beacon of success
Hamida Ghafour's excellent article "Dubai is still a beacon of success" (December 4, 2009,
) makes for compelling reading and touches a raw nerve. Ghafour says: "Dubai, however, offers hope and opportunity. It is like New York City in the late 19th century, raw and refreshing; attracting the hard-working and the ambitious from all over the Islamic world.
"The vast majority of its inhabitants are not the 20-something American investment bankers unable to splash out on Gucci luggage, or the British expat facing the prospect of giving up her Jumeirah beach house and returning to work at a supermarket back in Manchester.
"Dubai's citizens are Arab Nationals, South Asians and Africans. When they arrive the dream does not always match the reality but, as immigrants in the last century who fled famine and oppression felt, the prospect of returning home is usually worse." It's vital that we, the outside world (and) together with the local population, still see Dubai as this ‘beacon' of hope.
I'm of the opinion that the downturn is good; an opportunity to dispense with those that sought short-term financial gain based on a completely false economy of high credit - be they bankers, retailers, property developers or hoteliers.
These are neither the people, nor the businesses that had Dubai's best interests at heart, and I for one am not sorry to see such mercenaries fail. I do, however, applaud those that are prepared to wait, that have a solid long-term commitment to Dubai, and that recognise that confidence and prosperity will return - once the market has found its feet and re-established itself.
In the midst of the Arabian Desert, Dubai is a source of inspiration and a symbol of hope to many millions of people; a demonstration of what can be achieved. And I for one believe in the dream - better this than the alternative.
Bench Events organises the Arabian Hotel Investment Conference 2010. Details: