Dubai goes bust!
The massive economic failure in Dubai that is now becoming public is not surprising to those of us who have followed the massive construction projects undertaken there. In Doha, the capital city, they have built several striking high rises with modern architecture, a large airport, a huge hotel, a large set of man-made islands off the coast and are in the process of building a modern city in the desert. The question is where are the assets upon which these grand developments are based?
Dubai has no oil, so to plan for the future of their people the Government embarked on a huge program of development, designed to establish Doha as a modern trade, tourist and financial center. In doing so they borrowed billions of dollars, and were selling houses on the man-made islands (built in the form of a palm) for millions of dollars. But, the income was not enough and they have now asked their creditors to accept a delay in payment on the interest of some b$90 in loans and apparently they are in deficit to the tune of $60 billion. This has caused a ripple effect around the world, causing some concern in capital markets.
While Doha seemed a rational attempt by an Arab country to modernize and plan its development, it seems that they went too far too fast. Development has to be built on something, some tangible assets. It is of course tempting to compare Dubai with Israel. But, the big difference is that Israel has developed gradually (although fast) on the basis of indigenous entrepreneurial advances, such as hi-tech business (cell-phone, software), biotech (drugs) and agriculture (drip irrigation). These efforts have resulted in industries that are the envy of most of the world.
Some of you may be aware of the new book "Start-up Nation" by Saul Singer that documents the development of Israeli hi-tech and IT advances, and gives the data showing that Israel has more start-ups than all of Western Europe combined and Japan, and is second in the world only to the US. It is also tempting to advise investors that putting their money in Israel is a far safer bet than in Dubai or any other Arab country.
Dubai has no oil, so to plan for the future of their people the Government embarked on a huge program of development, designed to establish Doha as a modern trade, tourist and financial center. In doing so they borrowed billions of dollars, and were selling houses on the man-made islands (built in the form of a palm) for millions of dollars. But, the income was not enough and they have now asked their creditors to accept a delay in payment on the interest of some b$90 in loans and apparently they are in deficit to the tune of $60 billion. This has caused a ripple effect around the world, causing some concern in capital markets.
While Doha seemed a rational attempt by an Arab country to modernize and plan its development, it seems that they went too far too fast. Development has to be built on something, some tangible assets. It is of course tempting to compare Dubai with Israel. But, the big difference is that Israel has developed gradually (although fast) on the basis of indigenous entrepreneurial advances, such as hi-tech business (cell-phone, software), biotech (drugs) and agriculture (drip irrigation). These efforts have resulted in industries that are the envy of most of the world.
Some of you may be aware of the new book "Start-up Nation" by Saul Singer that documents the development of Israeli hi-tech and IT advances, and gives the data showing that Israel has more start-ups than all of Western Europe combined and Japan, and is second in the world only to the US. It is also tempting to advise investors that putting their money in Israel is a far safer bet than in Dubai or any other Arab country.
posted by Jack Cohen at 7:13 AM
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