we haven’t heard from Dubai in a while.’
‘That doesn’t mean the problem has gone away.’
‘Dubai Holding’s in trouble.’
‘That’s controlled by Al Maktoum.’
‘Yeah. Designed to consolidate their infrastructure and investment projects.’
‘They’ve missed loan repayments.’
‘What do you expect from that kind of place?’
‘What do you mean? They’re monarchies like the UK and their financial system
is dodgy.’
‘Not quite Pat!’
Barton laughed as Kennedy grinned sheepishly.
‘All those skyscrapers are assets, someone will end up buying them.’
‘If they’re not bombed by Iran.’
They both laughed.
‘Being serious for a moment Pat, every time they complete one of those
buildings, it adds to the market over-supply. So it’s going to take some time before
the situation sorts itself out.’
The doomsters rubbed their hands with joy, seizing on the news to shout I told
you so. Barton had to admit to a grim satisfaction; he was one of the few who had
not stood idly on the side lines.
The news that Government of Dubai would restructure Dubai World shocked
investors. Dubai was the champion of the real estate bubble where no idea had
been too outlandish. The brief statement announcing the news had been issued just
as the Emirate shutdown to celebrate the Muslim feast of Eid al-Adha nicely
coincided with the long Thanksgiving holiday weekend in the US, catching
investors by surprise. Banks and financial institutions in the know had been short
W
selling Dubai World for months in the certitude it could not meet its obligations.
In just five weeks the world’s tallest building was due to be inaugurated by
Sheikh Mohammed bin Rashid Al Maktoum and the public would be able visit
Burj Khalifa’s observation deck, 828 metres high, and enjoy the spectacular view
over a skyline of half-finished buildings and empty construction sites. Dubai’s
once booming economy had to all intents gone into default and its property sector
had all but collapsed. Hundreds of projects worth more than three hundred billion
dollars were cancelled, shut down or hobbled, causing property prices in the
emirate to plunge by as much as sixty percent.
Dubai World, headed by Sultan Ahmed bin Sulayem, managed businesses and
projects for the Dubai government. It included Nakheel, the property developer
promoting Palm Jumeirah and The World, both built on reclaimed land off the
coast. Dubai World’s outstanding liabilities represented nearly three quarters of the
Emirate’s total debt, and the mere thought the company could be in difficulty,
caused the cost of insuring against its possible default to jump higher than that of
Iceland’s, reducing the value of the Emirate’s leading state owned companies to
junk status.
Tarasov and Kennedy had been momentarily taken by the idea of investing in
Dubai ― to Fitzwilliams dismay, but with the growing rumour that The World was
sinking into the sea, true or not, Tarasov put a quick stop to the idea, preferring to
focus his attention on London and Moscow. Work had stopped on the artificial
islands, sandbanks as Fitzwilliams called them, and there were few takers for
existing commercial property in the Emirate.
Tom Barton wondered about the fate of the vast numbers of Indian workers in the
Gulf region, many of whose families were now deprived of remittances, transfers
that represented a large part of India’s foreign revenues. Kerala would be most
seriously affected, as it accounted for about a quarter India’s labour force in the
Gulf’s hard hit construction industry.
The news stunned politicians and fear of a domino effect ripple through financial
markets, leaving investors wondering which country would be next; Greece, Spain,
even China. Leaders were left grappling with the consequences of the crisis with
little time to reflect on the causes or the shape of things to come.
Not all felt concerned by the bad news. There was Tony Blair for one. He had
little to worry. Since he had quit office he had become one of the richest ex-prime
ministers in British history. His property included a palatial residence in
Buckinghamshire, bought for almost six million pounds, and a home in London
that had set him back another five million. After handing over the reins of power to
Gordon Brown, Blair’s personal wealth had grown at a phenomenal rate. The same
could not be said for the mass of now disillusioned Labourites who had voted for
him.