GUEST COMMENT: A brief message to the deluded of Dubai
As a Dubai-dweller, I've found it hard to gauge the mood of the city over the past few days. In the mostly pro-government press, the only news is good news. 'Investors show trust in Dubai' trumpeted Gulf News, just as investors were doing exactly the opposite by sending the market value of Nakheel's Sukuk plummeting.
As a result, the streets and bars have been buzzing as usual and Eid Al Adha has been celebrated as it always is. Outwardly, the change has been negligible.
But maybe Dubai bankers' blithe faith in the future of the desert wonderland is part of the problem. Because, none of this should really have come as any surprise - unless, of course, you were way too busy playing golf, or loitering in a 50th floor bar overlooking the harbour, to take much notice of what's been simmering in the corner.
Dubai World racked up $59bn in debt over a few years to build the likes of a giant island shaped like a palm tree. When property prices fell 40% in the first three months of this year alone, it should therefore have been a source of concern - except that everyone thought the government, or more realistically Abu Dhabi, would bail us out (we're part of the same country, after all).
But if investors thought their purchase of the Nakheel Sukuk was a safe bet, they've been proven both both deluded and incompetent. Deluded, because it's patently not very safe after all. Incompetent, because the December 2006 prospectus of the $3.52 billion Nakheel Sukuk says: "Investors should note, however, that the government of Dubai does not guarantee any indebtedness or any of the liabilities of Dubai World."
Unfortunately, this sentence is buried somewhere in the middle of page 35 of the prospectus. And if you're based in Dubai there are many more fun things to do than reading the small print.
The upshot is that a lot of the bankers and investors who bought into the Nakheel Sukuk are now facing an uncertain future. Depending upon what happens this week, so are the other expat financial services professionals working here. But was it ever really going to be any different? The Dubai that survives will be both smaller and humbler. Expats will have to leave. They shouldn't be surprised: careers can't be built on hot air alone.
Next time, I can only suggest one thing: before committing yourself to a career overseas, make sure you know what you're getting yourself into. It helps to read the small print.
