One day a cloud of hungry locusts approached the kingdom demanding to be fed money for they had given the king a little here and a little there to help him build the skyscrapers, indoor skiing facilities, and other massive capital investments with dubious return on investment. The king told the locusts and the media gadflies and the investment analyst ticks swept in on their wake that they would not be given the money they greedily sought.
“Hey look”, said the king, “We’ve got around $90 billion in debt and we haven’t got a nickel back from a lot of our investments. If I ever get my hands on those bastards who sold us that roach motel in Times Square I’m gonna give them a Columbian necktie. By the way are those imported Columbians still around or did we forget to pay them too? What, we have some Filipinos left? OK, that’ll do. Where was I? Right, you can’t have your money we’re a little short on cash.”
One of the locusts spoke up. “So you’re not going to pay the interest you owe us on those bonds we bought and those loans we gave you? Well OK then, you better sell some of your stuff or get a loan from that boring oil-rich fiscally responsible yet heavy handed kingdom next door. Because if you don’t pay out one way or the other, after we gut this joint we’ll start swarming over to other lands we have leant to and demand from them fat wads of money to shove into our hungry pusses.” With this proclamation a few of the gadflies sped off to spread the news and one of the ticks keeled over at the thought of not feeding again for a very long time.
“You can kiss my sovereign ass” said the king as he closed the solid gold Medici replica doors to the kingdom behind him. The people rejoiced as once again their beloved hereditary monarch had flipped his jewel laden middle finger at the insects from the west. And that night they all slept blissfully dreaming of sustained 10 – 12% GDP growth and low taxes.
The fairytale existence of Dubai has come to an end. I can’t say the Dubai World financial Hindenburg registers very high on the schadenfreude meter (see below) as you have to hand it to the city state’s leadership for truly creating something from nothing. In thirty odd years they have gone from dredging a creek to creating a stunning cultural and economic center for the Arab world. But like other developing world high flyers they took on too much risk in areas that were highly susceptible in economic downturns: Real estate and tourism foremost among them.
With its failure to meet interest obligations on the debt of a government owned enterprise Dubai is not dead, it’s only mostly dead. That is to say gone are the days of endless growth and island making. It’s kind of sad as it was wicked fun watching Dubai build all that cool stuff, especially if you have Discovery HD. Dubai will live on, quite nicely I think, but it can be removed from the “ai” musketeers: Dubai, Shanghai, and Mumbai. The big question is could one of the other “ai’s” be next?