Interpreting the Dubai financial storyWritten by Dan Johnson | | email@example.com
I was on a flight to Madrid on university business when the story broke on Dubai’s financial problems. It was only after I checked into my hotel and turned on CNN that learned what had happened. Like many around the world, I followed the story in the western press and media, i.e., the Financial Times, The New York Times and others. It was also a major story in the local media in the U.A.E. as well and, of course, like most people here, I followed it closely. I’ve also talked to business and education leaders in Dubai as well as Abu Dhabi about this financial turn-of-events and what it really means for the present and future of the United Arab Emirates and its economy.
Based on the media coverage that I have seen plus my own observations, I suggest a somewhat different interpretation of the Dubai financial story.
Everyone agrees — both here in the United Arab Emirates (U.A.E.) and elsewhere — this was an important event that has international financial implications. However, I also believe — rather strongly — that the nature and extent of the media coverage has become, unfortunately and unfairly, a significant part of the financial equation. Much of the media coverage I saw misread what was happening and why it was occurring. The language used by many Western media outlets to describe the restructuring of the debt as “a collapse” of the Dubai economy, a “meltdown” of Dubai, the “demise” of the U.A.E. economy and similar descriptors were emotionally charged, inaccurate words that elevated investor fears and exacerbated this problem. It seemed to me as I read and reviewed the stories that there was a clear case of media emotional contagion that contributed to the financial challenges of a rapidly growing Dubai economy that was hit hard by the global recession. The media coverage of the Dubai debt restructuring became a “story” itself, which is worthy of investigation.
From our vantage point in Dubai, where we had witnessed the growing impact of the global recession on local developments, it was difficult to understand the near hysteria, shock and surprise reflected in much of the media coverage. The hundreds of stories published, as well as the hours of television news devoted to the Dubai story, seemed to be out of proportion to the request to restructure this debt, particularly in the context of the impact that the global recession was having on corporations and governments around the world. The “out-of-proportion” coverage elevated the level of fear among investors, which continued to contribute to the challenges of managing the problems and debt restructuring.
It was difficult for me, reading online news reports and watching Western television news coverage and the reactions of the world’s markets, to interpret this “story” as it was being presented as anything but a lack of understanding of the Dubai economy and how it works. There are, of course, more cynical interpretations of how this story has been presented to the world, but my view is that the West has a great deal to learn about the Middle East, its governance, financial markets, lines of authority and the values that are major drivers of its developing economy.
What has been the impact of all this? While I can’t answer this question fully, I do know that one impact has been the misrepresentation of Dubai and the U.A.E. for the average person in the United States. While I was in America for a week in December, countless people asked me about the “collapse” of Dubai, the Dubai “meltdown” and wondered how the country and city were coping. Their image of Dubai was one of a ghost town in deep crisis. This inaccurate image and misunderstanding is the result of the way the media has presented this story.
The debt restructuring has had an impact in Dubai. It is serious and the leadership in Dubai, Abu Dhabi and the U.A.E. are taking it seriously, working hard and cooperatively, to address the problem in a responsible way. One of the reasons I believe the problem will be successfully addressed is the responsibility the leadership accepts for the respective Emirates. Their portraits are found in most buildings and institutions. There is a level of personal responsibility and accountability for the Emirates that is accepted by the leadership and is understood by the citizens and expats working here. The resources in Dubai and the U.A.E. nation are vast and the capacity for addressing this problem are evident.
Like California and other hot spots in the U.S. and elsewhere, Dubai’s real estate market was overheated due to a lack of residential and business properties during the past few years. Many new projects were initiated to meet this demand and to continue the growth of Dubai and the Emirates. Demand was outstripping the supply and prices escalated. The global recession, however, took its toll here in Dubai as it has in nearly every country. For reasons that are hard to understand, this story became the financial story of the week, affecting global markets, images and reputations in ways that more knowledgeable individuals saw as ill-founded and misleading.
I’ve been in the U.A.E. for only a short time, but in that time have come to see the entrepreneurial spirit, the creative economic development strategies and the bold leadership in the Emirates as qualities that will endure and engender renewed growth in the post-recession economy. Clearly, the recent events in the finances of Dubai represent a significant “bump in the road.” But the way ahead is clear; hundreds of projects continue, hundreds of thousands of workers are employed on the new Dubai Metro, the Burj Dubai, which opened Jan. 4 as the tallest building in the world, and an increasing number of tourists arriving at the Dubai International Airport every week.
I can say that I have been personally inspired by what I have seen in this new country. Its accomplishments during the past 30 years in the face of daunting odds, not the least of which will be the current recession, have been nothing short of remarkable. It would be shortsighted, to say the least, to count Dubai out.
Dan Johnson is provost and COO, Zayed University, United Arab Emirates and UT president emeritus.