Tuesday, December 1, 2009

Dubai or Bust:

The news coming out of Dubai is that one of their government owned (not backed whatever that means) entities have asked the international community (namely creditors) to delay requesting their money back by six months. Well how about that, it was fun when they were building a huge Atlantis there (to be fair they did try to over do it) but now the hen has come to roost. Hopefully they would have learnt their lesson and stop making huge extravagant mega projects for which they did not have the money.

Now you can say that maybe it was not their fault entirely since they sold their dreams to investors all around the world and the investors bought it in droves.

It seems that it takes two to tango and the investors and financial institutions were too

Eager (and overzealous and reckless) in giving credit to them without going over their financials. Maybe it was the illusion created by Dubai that since it is part of a federation and the federation will not let one of its emirates (or states) fail, the richer and the most powerful Abu Dhabi will bail it out. But now it seems that it will do it on a case by case basis. Well it seems that what has happened in the United States (like the reckless extension of funds to subprime borrowers) has spread its tangles to the rich Arab Countries.

Although it seems that the somewhat default of Dubai is being contained and we will have to see how it is tackled by the Emirates, it serves as a lesson to not overextend your loans and always check the financials no matter who the backer is.

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