Dubai: Back to Business As Usual?

Tarik M. Yousef
Tarik Yousef
Tarik M. Yousef Former Brookings Expert

December 15, 2009

Editor’s Note: Tarik Yousef appeared as a guest on the Riz Khan show to discuss Dubai’s financial future following the Emirate’s recent debt troubles and the announcement by Abu Dhabi that it would lend 10 billion USD to help Dubai World, the state-owned conglomerate, repay some of its creditors.

Riz Khan: Tarik Yousef, in Dubai, how much damage could there be? There is still some more to come; there is still a bit more sweating to be done with a fair amount of debt still outstanding. What is being said there, on the ground in Dubai, among the power circles about how things might pan out in the coming months?

Tarik Yousef: I think there is still a bit of anxiety in Dubai and the UAE about the future of the next six months, and especially what happens after six months from now. There was quite a bit of euphoria in the last 24 hours, following the announcement of Abu Dhabi’s injection of funds and the introduction of what looks like a reasonably transparent framework for bankruptcy and restructuring that was specifically introduced to help and aid Dubai World. So, market sentiment has dramatically changed in the last 24 hours on account of this announcement. But given what happened in the last few weeks, much remains to be seen in the next few months, and questions are being asked today as to what lies ahead. I think it is correct to perceive the action being taken yesterday as one with the UAE as a country: it has taken matters in its own hands, it is wresting back initiative from international media, from international investors, and it is trying to gain the upper hand in setting the tone for moving forward.

Khan: To what degree is this situation, this having to be bailed out, going to manacle Dubai and perhaps curb its ability to be able to move forward with the kind of vision that certainly the leadership, Sheikh Mohammed [bin Rashid al Maktoum], had?

Yousef: I think when the dust settles, Dubai will emerge and remain the preferred hub for much of the business that flows through this region – and by this region, I don’t just mean the Arab world, or the Gulf, or the large Middle East, but the frontiers of Asia. These are some of the important fundamentals that will serve Dubai in the long term. Some of the reputational cost issues at present, some of the image problems that may have been damaged on account of recent actions, will have an effect. But, if the fundamentals are there – and there is almost a consensus, I would say, among observers especially in the region that Dubai will retain its premier place as the hub for much of the important, not just local and regional business, but international business. I think moving forward, Dubai will be able to survive on account of this, and regain much of the lost ground of the last couple weeks.

Watch part 1 of the program (Al Jazeera English website) »

Watch part 2 of the program (YouTube) »