Dubai’s reputation for both business acumen and business honesty continues to dissolve. The request from Dubai World for a standstill on their debt is just latest evidence of the financial whirlwind that the state is reaping after a decade of profligate spending of other people’s money on increasingly hubristic projects. The decision to release the statement after the markets closed for a long holiday won’t do anything to assuage the anger of investors who will see this as another naked attempt to massage the sentiment of the market.
Default swaps on Dubai’s sovereign debt are now higher than Iceland’s which is evidence of the market’s appreciation of Dubai’s real position. Expect a dignified firesale of national assets like Emirates and Dubai Ports.
Dubai always tried to present itself as the place in the Gulf to do business, but the financial situation and the opacity of the nomenklatura is rapidly destroying Dubai’s reputation for business ethics and honesty.
Unpaid workers strike, contractors are taking principals to court and increasingly Dubai’s business enviroment is being seen as the Vegas of the Gulf. In the end all that glitters is not gold!