About the Dubai Crisis

There is cause for concern in Abu Dhabi’s reaction to the crisis that is unfolding one step at a time in Dubai. Indeed, it has been ascribed to officials in the UAE government that the state will not provide complete coverage of the debts of companies in difficulty in Dubai, but will rather “look into each case on its own”.

From a financial point of view, Abu Dhabi is approaching the problem of the delay in settling Dubai’s debts, the latter having asked for an additional six months to pay the interests on its massive loans, with a kind of professional caution, if one may say, at a time when loaning parties had based their expectations on “political” intervention on the part of the government of the United Arab Emirates, or on that of the Emirate of Abu Dhabi, to face any financial difficulty that might arise before Dubai, which had kept the world engrossed with its extravagant projects and excessive spending. Yet the past few days have shown that Abu Dhabi has a different opinion.

Perhaps it is not too late to remind of the dangers that Dubai’s economy has ignored for around two decades. Indeed, despite its success at occupying a prominent position in trade mediation at both the regional and international levels, the Emirate has been a terrible example of economic risk-taking, in terms of the weak bases of the “real” economy, which is supposed to provide support to trade and real estate projects. Dubai is not the only one in the Gulf to follow such a trend, but comparing what countries in which oil production has dwindled have adopted over the past decade with what took place in Dubai, which has never possessed large oil reserves, undoubtedly shows that the path taken by the Emirate has been greatly excessive, in terms of being linked to international climates and trends that have not proved effective in overcoming previous crises.

Returning to Abu Dhabi’s reaction, one must say that fears have arisen that the reasons behind the “caution” in helping Dubai with its difficulties are not limited to economic and financial ones.

Furthermore, the recent round of antagonism between Algeria and Egypt justifies expressing fears of internal Arab relations, which are unwell and lying beneath a thin coat of deceptive appearances, waiting for a football game or a financial crisis, becoming an additional ailment afflicting the economy as well as financial and real estate institutions.

It would perhaps be fair to say that the problem in Dubai, the size of which began to take shape last week (although its first signs had appeared since the eruption of the global financial crisis in September 2008), does not concern the UAE or the Gulf states alone. A survey of the names of the parties that will suffer grave losses in the United States and Europe, up to the negative repercussions on a number of Arab countries, indicates two things: first, that the failure of risky economic ventures does not harm only parties directly involved, but rather reaches beyond them a long list of harmed parties spread across the reaches of the world; and second, that curbing the whims of colossal projects built on the quicksand of individual “vision” lacking accurate scientific study has become the responsibility of local and international economic and political bodies.

Such a view drives one to wonder about the mechanisms of monitoring, calling to account and expanding the bases of good governance in our Arab countries. Needless to say that such an approach is connected to political decision-making on the one hand, and, on the other, to a desire not expressed by our societies to avoid additional risky ventures of different kinds.