Dubai Rescheduling: "The Murky Gulf"

 

Speakers' Corner Hyde Park

Copyright Heniz-Josef Lucking

Creative Commons Attribution-Share Alike 2.5 Generic license. 

I almost burned my hand earlier today when I picked up my copy of the FT. Luckily I was still wearing my mittens. It's cold here.

It's been more than a few hours since that encounter.  So now the FT is safe to handle.

It didn't take me long to find the source of the heat - there are scorch marks on the editorial page.  

The Murky Gulf indeed.

Of late lots of people have been mightily exercised about transparency.  A Lord, A Deputy, the IMF (a topic for a separate post) and now the FT adds its voice to the chorus.

Certainly, there could be more transparency in Dubai as some might even wish for in the management of the finances of certain members of the EU.  And perhaps even on the other side of the "pond".  Kalaam sharif is not only a good idea from a business perspective but an ideal shared across many borders as this phrase suggests.  It's the right thing to do.  Despite what follows in this article, make no mistake AA is partisan of transparency.

But I think all this hub bub over transparency is a bit misplaced.   

Many of the current critics of Dubai would be silent on the issue of transparency if the Shaykh up the road wrote a check and paid off the foreign bankers.  I don't recall any jeremiads when Shaykh Khalifah put his pen to cheque book for Nakheel.  No demands for transparency on that transaction.  Demands, if any, were more likely that he keep his cheque book out.  

The fundamental issue, I believe, is that the handwriting has appeared on the wall.   And it seems to say:   "Mene, Mene, Tekel Parsin".  Which as any good banker knows means "Long tenor.  Probable loss.  Haircut rather short". 

And so the Lord and the Newspaper no doubt have many good reasons, perhaps as many as 5 billion, to raise the banner of transparency.

It's also a bit of a stretch to bring this topic up now.  Did anyone - even those naive financiers who believed and perhaps still do in the "Implicit Guarantee" - think that Dubai was a paragon of disclosure when they entered the market?  A modern financial Athens on the Creek?  Do they also believe that the PRC is one?

Did they miss L'Affaire Philip Thorpe in 2004?  Were they asleep when the Head of Dubai Customs was jailed much earlier for some rather serious wrongdoing and then miraculously pardoned?  Was this the first foreign country they ever did business in? 

The most economical and profitable due diligence is done before one makes a loan or investment.   Think of it as one's annual physical.  Later due diligence often turns out to akin to an autopsy - interesting but not particularly useful to the subject.