This news article from the WSJ published minutes ago is bound to reappear in Singapore's newspapers soon. After all, the Straits Times and even lately the Lianhe Zaobao has even gotten into the act carrying negative press of Dubai. Now I wonder if an MP or even minister would use Dubai as an example why Singapore has been careful with debt. Debt like fire is a good servant but a bad master. Take this from Warren Buffet - Understand your margin of safety and so always keep debt as a servant. Dubai had been reckless. I felt it three years ago and among other reasons, we decided not to move here. We are only here now for some out of this world reasons which we do not yet understand. Interestingly I have also met other Singaporeans who are here for such unknown reasons too. No, we are not spies, it is more spiritual than temporal.
Back in 1971 when the UAE was formed, the world was a different place. For the last two decades, business has come to the fore and political solidarity relegated to the back. Now that the unity of the UAE has been tested, we can see it has all been reduced to business between them and not much more.
They say blood is thicker than water, which they do not have enough here. Today we see that liquidity (money) is probably thicker than blood.
So really just business only? I act "blurr" of course.
FEBRUARY 16, 2009, 5:12 A.M. ET
Don't Count on a Dubai Bailout
By ANDREW CRITCHLOW
Will oil-rich Abu Dhabi bail out neighbor Dubai, currently groaning under $70 billion of debt racked up its government-owned companies? Don't count on it.
Abu Dhabi's decision last week to pump $4.4 billion into its own banks while offering no support to lenders in Dubai or other emirates in the Gulf federation may simply be brinkmanship amongst the sheikhs. But the possibility Abu Dhabi will refuse to come to Dubai's aid -- once seen as almost unthinkable -- can no longer be ruled out.
That raises the prospect of a deeper debt crisis in Dubai. And even a fragmentation of the 37 year-old federation if Abu Dhabi refuses to pump billions of dollars into the economies of poorer emirates like Dubai to prevent either a corporate default or severe downturn. The cost of insuring Dubai debt has rocketed to around 10 percentage points for five-year debt -- higher even than Iceland.
Dubai's economy is contracting sharply after a 40% slump in property prices, leaving the emirate struggling to refinance $15 billion of debts this year, according to credit rating agency Moody's. Without Abu Dhabi's help, it has little chance of doing so. Moody's says it is likely to downgrade a raft of state-owned companies "if a trend of selective treatment within the federation becomes discernible." And bankers say they won't extend new lines of credit to Dubai without cast iron financial guarantees from Abu Dhabi.
Abu Dhabi is driving a hard bargain. Its demands are thought to include the surrender of Dubai's autonomy and the loss of control over crown jewels such as Emirates Airline and Nakheel, builder of the emirate's Palm-shaped islands. That may be too much for Dubai's ruling Maktoum family to stomach -- partly because the rulers of the two sheikhdoms are cousins. But also, because Dubai contends it was a principle of the 1971 agreement to form the federation that Abu Dhabi would use its oil wealth to support the other emirates.
Abu Dhabi has its own economic worries, thanks to falling oil prices, which account for the majority of the emirate's export earnings. Plus, its reserves have been depleted by the huge losses suffered on its foreign investments, such as the $7.5 billion Abu Dhabi pumped into Citibank in 2007 just before its shares collapsed.
But neither Abu Dhabi nor Dubai can afford to allow this stand-off to drag on. Default by a major Dubai-owned company would trigger a crisis of confidence that could cost the emirate its status as the preeminent center for business in the region. Worse, it could pull on the very fabric that binds the emirates together, destabilizing the entire region.
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