Turning Point by John Francis Kinsella
Not even a year had passed since Barton had made his first three day stop-over in booming Dubai. Since then things had changed at a startling speed as the emirate’s government, in danger of bankruptcy, struggled to raise the billions needed to service its debts. Dubai, part of the United Arab Emirates federation, with little oil revenue, had boldly tried to transform itself into a financial and tourist centre investing enormous sums of money in a vast construction programme building offices, hotels and apartments. That dream was now in tatters and one hundred thousand British expatriates shuddered at the thought of returning home to a cold depressed UK, leaving their luxurious apartments and Porsches behind them to the sands of the desert.
Dubai was part of the United Arab Emirates, a federation of seven emirates or states, which included Abu Dhabi the biggest, Dubai, Sharjah, Ajman, Umm al-Quwain, Ras al-Khaimah and Fujairah. Abu Dhabi was the federation’s political, industrial and cultural centre, and Dubai its financial hub. Historically the UAE was known as the Trucial States, from a 19th century peace treaty concluded between the British Empire and a group of Arab Sheikhs.
The UAE held the sixth largest known oil and gas reserves of the planet, though Dubai’s share was very, very, small, making it dependant on the development of finance and tourism.
Dubai had sealed its future in a Faustian deal by trading it against a decade of wild construction financed by low interest rates and debt. The crash came when the magic carpet of rising property prices stalled exploding the dream that their distant scorched coastline could be transformed into another Costa del Sol for sun thirsty Europeans.
As the rot set in thousands of expatriates discretely packed their bags and quietly slipped out of the Emirate, never to return, leaving unpaid bills, credit card debt and unprovided cheques behind them covering rent, payment for cars and other big ticket purchases. Cheques, part of Dubai’s banking and payment culture, made the purchase of a car child’s play writing a series of cheques to cover the totality of the monthly payments in advance even though a buyers account may have been empty at that moment the cheques were written. Expats from around the world had lived the life of Reilly taking advantage of easy cheap credit during the Emirate’s extraordinary boom, buying anything from a penthouse house apartment to a motor cruiser and frequently without the least guarantee.
Oil and gas accounted for just six per cent of Dubai’s economy and its already low oil reserves would be exhausted within a couple of decades. On the other hand its foreign debt exceeded one hundred billion dollars; the equivalent of four hundred thousand dollars in debt for every Emiratee national: man, woman and child, who in fact represented only a fraction of the small state’s population.
Tom Barton had seen Dubai for what it was, a vast property bubble, and moved on. In its place he discovered the Caribbean, a haven of peace with its offshore banking, tax shelters and holiday islands. The depressed business environment had its positive side; it contributed to calming the rhetoric of hotheads like Chavez, as for Castro’s brother and successor, Raul, he focused his attention on trying to dig Cuba out of the deep hole it had made for itself.
Turning his attention to the region’s investment prospects Barton arrived at the Caribbean Hotel & Tourism Investment Conference being held in Miami, where bankers, investors, developers, hoteliers and the industry’s multiple suppliers were gathering at their annual event.
Drifting through the crowd at the inaugural reception he paused to listen to an attractive delegate telling her admirers how she had fled Dubai after the sudden disintegration of its economy leaving behind an apartment she had bought on a fifteen year mortgage.
‘I was lucky, if you don’t pay your debts in Dubai you could end up in prison,’ she told them.
Barton remembered as he listened how on his arrival in the Emirate he had been astonished at the extraordinary property boom and the extravagant prices for apartments. Times were now different; the Emirate’s economy was in mired in the sand, the international press regularly published pictures of the rows of dust covered cars at Dubai’s airport, upmarket models, abandoned by foreigners who had quit the country to flee their debts.
Those without employment were legally obligated to leave the country within a month, but the problem was over eighty percent Dubai’s population were foreigners on work visas. If they were all to leave the country would come to a standstill with a downward spiral in prices and empty properties. The Emirate was cancelling one thousand five hundred work visas every day and tens of thousands had already left. The collapse of real estate prices was causing havoc in the construction business as hundreds of projects stalled for lack of cash and others were definitively cancelled.
It was beginning to look like a Middle East version of Iceland. Dubai had been sucked into the property boom and was now paying the price for its exaggerated ambitions with almost six hundred billion dollars worth of deals suspended and many of its state financed companies being downgraded by the rating agencies.
It was a sign of things to come as oil ran out. The idea of building the first post-oil society began to waver like a mirage in the desert sands. There was a limit to how many Singapores the world needed. Dubai, unlike the other emirates, had little or no oil and had dreamed of becoming a great financial centre and tourist destination. That was now beginning to seem like a pipe dream as Barton had suspected on his first visit to the Emirate. To make matters worse rumour had it that Palm Jumeira, one of the artificial offshore islands, was sinking into the sea.
Barton remembered the locals sitting around in coffee shops in the deserted malls, their enthusiasm deflated, returning to the old Middle East tradition of smoking, drinking coffee, and worrying…when they were not at home sleeping to pass to the time of day.
He spotted Steve Howard talking to a banker type and made him a sign.
‘Hi Tom, how are you doing, nice to see you.’
Howard was exploring the region for his Spanish friends who were expanding their hotel investments in the region.
‘Let me introduce you to Ken, he’s with a London developer, worked quite a bit in Dubai.’
‘Was there for a couple of days myself a few months back. It’s looking pretty bad for them now,’ said Barton shaking Ken’s hand.
‘Ken worked a lot with Nakheel, he tried to convince me to get involved a couple of years back,’ Steve said winking. ‘I took a peek, but between the skyscrapers there’s nothing sand, not my cup of tea, it’ll take them a life time to put that right, if ever.’
‘Steve is right,’ Ken added with a sorry smile. ‘A lot of people made good money there including myself, but the good times have gone, the recession is a disaster for them. A lot of UK firms invested money there, billions, money they won’t get back.’
‘Who is going to buy property there now with prices down fifty or more percent and still falling?’
‘The Iranians,’ he laughed.
‘The number of projects that have ground to a standstill or cancelled outright is mind boggling, hundreds of billions of dollars worth. We’ve pulled the plugs on our projects there, though it’s still a good place for a holiday now, if you can put up with the heat, there’s rooms galore available at give away prices…that’s why I’m here looking for new opportunities.’
‘Not the case for Dubai, at least for the moment.’
‘A pity. I don’t know who’s going to run the country now, they’ve depended almost entirely on westerners to manage everything; contractors, banks, hotels and airlines. All their manual labour comes from India or Pakistan. They reckon the population could fall by a third. On top of that their government has complicated it now by requiring expats to renew visas every six months.’
‘So how’s Dominica?’ asked Steve.
‘Quiet, I can’t say it’s booming, it’s the complete opposite to Dubai, it’s green, beautiful, natural and Christian…that may be politically incorrect, but it’s a fact. The kind of foreigners it attracts are I suppose up market types looking for peace and ca
lm.’
‘Like you Tom.’
‘I suppose so.’
‘Can you imagine 38°C on Jumeirah Beach in Dubai? Listening to unemployed expats complaining!’
‘Not really,’ he said remembering how hot it had been there.
‘The slowdown has really hit expats hard. They’ve little choice, if they’re lucky they might find a job, but with less pay now, or you pack up and head home.’
‘I lost my job as a business consultant after three years there. I had just six weeks to find a new job before being ordered to leave.’
Dubai World, and its subsidiary company Nakheel, had built three groups of artificial islands a couple or so kilometres offshore in the waters of the Persian Gulf. The construction of The World, composed of three hundred islands, had started in 2003. By late 2008, it was in deep trouble, England, one of the islands, was deserted, and Australia had merged with New Zealand.
An Irishman, John O’Dolan, who led a consortium that bought Ireland in 2007, for nearly forty million dollars, had killed himself.
Where were Brad Pitt and Angelina Jolie who were rumoured to have bought Ethiopia? Where was Richard Branson who was supposed to takeover England? The three hundred islands were nothing more than a desolate collection of offshore sand banks, an immense folly.
There was little left for Sheikh Mohammed Bin Rashid Al Maktoum, Dubai’s ruler, to do than declare, like Gordon Brown, he would steer his country through troubled times.
Hot on the heels of bad news that poured in from the Gulf came the rumour that the Indian Tata Group was having difficulty in accessing credit. Tata Motors had failed to make a statement on the refinancing of a billion pound bridging loan to fund the acquisition of Jaguar Land Rover the previous year. Tata had spent almost twenty billion dollars, most of it borrowed, in an aggressive expansion drive of its international holdings.
Beyond India’s jetset and Bollywood hype and a decade of extravagantly publicized economic growth, child malnutrition rates in India remained worse than in many African countries. The pathetic state of child health and education was a stark contrast to the loudly proclaimed expansion of its middle classes.
India, a paradigm of democracy, two superimposed incompatible nations — one rich and the other miserably poor, seemed to ignore the needs of its downtrodden classes, boasting instead of its ultra modern medical system, designed to cater mostly for the wealthy and foreigners — medical tourists. Its government budgeted proportionally less money than smaller non-democratic countries, such as Vietnam, for the health of its teeming underclasses.
India’s lethargic and often corrupt bureaucracy had made little progress in addressing its sanitary problems. More than a hundred million Indians, in most cases women and young children, suffered from hunger and malnutrition. States like Madhya Pradesh lay somewhere between Chad and Ethiopia on the misery scale. Barton had witnessed the insalubrious lanes with overflowing drains, rampant diseases and thin wide-eyed children, victims of malnutrition.
In just a year the global economic system had totally changed and Barton silently congratulated himself on having got out whilst the going was good. His priority was to conserve his capital. It had not been easily earned, it was the fruit of years of work, though he had to admit his exit was not exactly according to the rules, when the sky falls in it’s every man for himself he bitterly rationalised.
Scams
Dubai was part of the United Arab Emirates, a federation of seven emirates or states, which included Abu Dhabi the biggest, Dubai, Sharjah, Ajman, Umm al-Quwain, Ras al-Khaimah and Fujairah. Abu Dhabi was the federation’s political, industrial and cultural centre, and Dubai its financial hub. Historically the UAE was known as the Trucial States, from a 19th century peace treaty concluded between the British Empire and a group of Arab Sheikhs.
The UAE held the sixth largest known oil and gas reserves of the planet, though Dubai’s share was very, very, small, making it dependant on the development of finance and tourism.
Dubai had sealed its future in a Faustian deal by trading it against a decade of wild construction financed by low interest rates and debt. The crash came when the magic carpet of rising property prices stalled exploding the dream that their distant scorched coastline could be transformed into another Costa del Sol for sun thirsty Europeans.
As the rot set in thousands of expatriates discretely packed their bags and quietly slipped out of the Emirate, never to return, leaving unpaid bills, credit card debt and unprovided cheques behind them covering rent, payment for cars and other big ticket purchases. Cheques, part of Dubai’s banking and payment culture, made the purchase of a car child’s play writing a series of cheques to cover the totality of the monthly payments in advance even though a buyers account may have been empty at that moment the cheques were written. Expats from around the world had lived the life of Reilly taking advantage of easy cheap credit during the Emirate’s extraordinary boom, buying anything from a penthouse house apartment to a motor cruiser and frequently without the least guarantee.
Oil and gas accounted for just six per cent of Dubai’s economy and its already low oil reserves would be exhausted within a couple of decades. On the other hand its foreign debt exceeded one hundred billion dollars; the equivalent of four hundred thousand dollars in debt for every Emiratee national: man, woman and child, who in fact represented only a fraction of the small state’s population.
Tom Barton had seen Dubai for what it was, a vast property bubble, and moved on. In its place he discovered the Caribbean, a haven of peace with its offshore banking, tax shelters and holiday islands. The depressed business environment had its positive side; it contributed to calming the rhetoric of hotheads like Chavez, as for Castro’s brother and successor, Raul, he focused his attention on trying to dig Cuba out of the deep hole it had made for itself.
Turning his attention to the region’s investment prospects Barton arrived at the Caribbean Hotel & Tourism Investment Conference being held in Miami, where bankers, investors, developers, hoteliers and the industry’s multiple suppliers were gathering at their annual event.
Drifting through the crowd at the inaugural reception he paused to listen to an attractive delegate telling her admirers how she had fled Dubai after the sudden disintegration of its economy leaving behind an apartment she had bought on a fifteen year mortgage.
‘I was lucky, if you don’t pay your debts in Dubai you could end up in prison,’ she told them.
Barton remembered as he listened how on his arrival in the Emirate he had been astonished at the extraordinary property boom and the extravagant prices for apartments. Times were now different; the Emirate’s economy was in mired in the sand, the international press regularly published pictures of the rows of dust covered cars at Dubai’s airport, upmarket models, abandoned by foreigners who had quit the country to flee their debts.
Those without employment were legally obligated to leave the country within a month, but the problem was over eighty percent Dubai’s population were foreigners on work visas. If they were all to leave the country would come to a standstill with a downward spiral in prices and empty properties. The Emirate was cancelling one thousand five hundred work visas every day and tens of thousands had already left. The collapse of real estate prices was causing havoc in the construction business as hundreds of projects stalled for lack of cash and others were definitively cancelled.
It was beginning to look like a Middle East version of Iceland. Dubai had been sucked into the property boom and was now paying the price for its exaggerated ambitions with almost six hundred billion dollars worth of deals suspended and many of its state financed companies being downgraded by the rating agencies.
It was a sign of things to come as oil ran out. The idea of building the first post-oil society began to waver like a mirage in the desert sands. There was a limit to how many Singapores the world needed. Dubai, unlike the other emirates, had little or no oil and had dreamed of becoming a great financial centre and tourist destination. That was now beginning to seem like a pipe dream as Barton had suspected on his first visit to the Emirate. To make matters worse rumour had it that Palm Jumeira, one of the artificial offshore islands, was sinking into the sea.
Barton remembered the locals sitting around in coffee shops in the deserted malls, their enthusiasm deflated, returning to the old Middle East tradition of smoking, drinking coffee, and worrying…when they were not at home sleeping to pass to the time of day.
He spotted Steve Howard talking to a banker type and made him a sign.
‘Hi Tom, how are you doing, nice to see you.’
Howard was exploring the region for his Spanish friends who were expanding their hotel investments in the region.
‘Let me introduce you to Ken, he’s with a London developer, worked quite a bit in Dubai.’
‘Was there for a couple of days myself a few months back. It’s looking pretty bad for them now,’ said Barton shaking Ken’s hand.
‘Ken worked a lot with Nakheel, he tried to convince me to get involved a couple of years back,’ Steve said winking. ‘I took a peek, but between the skyscrapers there’s nothing sand, not my cup of tea, it’ll take them a life time to put that right, if ever.’
‘Steve is right,’ Ken added with a sorry smile. ‘A lot of people made good money there including myself, but the good times have gone, the recession is a disaster for them. A lot of UK firms invested money there, billions, money they won’t get back.’
‘Who is going to buy property there now with prices down fifty or more percent and still falling?’
‘The Iranians,’ he laughed.
‘The number of projects that have ground to a standstill or cancelled outright is mind boggling, hundreds of billions of dollars worth. We’ve pulled the plugs on our projects there, though it’s still a good place for a holiday now, if you can put up with the heat, there’s rooms galore available at give away prices…that’s why I’m here looking for new opportunities.’
‘Not the case for Dubai, at least for the moment.’
‘A pity. I don’t know who’s going to run the country now, they’ve depended almost entirely on westerners to manage everything; contractors, banks, hotels and airlines. All their manual labour comes from India or Pakistan. They reckon the population could fall by a third. On top of that their government has complicated it now by requiring expats to renew visas every six months.’
‘So how’s Dominica?’ asked Steve.
‘Quiet, I can’t say it’s booming, it’s the complete opposite to Dubai, it’s green, beautiful, natural and Christian…that may be politically incorrect, but it’s a fact. The kind of foreigners it attracts are I suppose up market types looking for peace and ca
‘Like you Tom.’
‘I suppose so.’
‘Can you imagine 38°C on Jumeirah Beach in Dubai? Listening to unemployed expats complaining!’
‘Not really,’ he said remembering how hot it had been there.
‘The slowdown has really hit expats hard. They’ve little choice, if they’re lucky they might find a job, but with less pay now, or you pack up and head home.’
‘I lost my job as a business consultant after three years there. I had just six weeks to find a new job before being ordered to leave.’
Dubai World, and its subsidiary company Nakheel, had built three groups of artificial islands a couple or so kilometres offshore in the waters of the Persian Gulf. The construction of The World, composed of three hundred islands, had started in 2003. By late 2008, it was in deep trouble, England, one of the islands, was deserted, and Australia had merged with New Zealand.
An Irishman, John O’Dolan, who led a consortium that bought Ireland in 2007, for nearly forty million dollars, had killed himself.
Where were Brad Pitt and Angelina Jolie who were rumoured to have bought Ethiopia? Where was Richard Branson who was supposed to takeover England? The three hundred islands were nothing more than a desolate collection of offshore sand banks, an immense folly.
There was little left for Sheikh Mohammed Bin Rashid Al Maktoum, Dubai’s ruler, to do than declare, like Gordon Brown, he would steer his country through troubled times.
Hot on the heels of bad news that poured in from the Gulf came the rumour that the Indian Tata Group was having difficulty in accessing credit. Tata Motors had failed to make a statement on the refinancing of a billion pound bridging loan to fund the acquisition of Jaguar Land Rover the previous year. Tata had spent almost twenty billion dollars, most of it borrowed, in an aggressive expansion drive of its international holdings.
Beyond India’s jetset and Bollywood hype and a decade of extravagantly publicized economic growth, child malnutrition rates in India remained worse than in many African countries. The pathetic state of child health and education was a stark contrast to the loudly proclaimed expansion of its middle classes.
India, a paradigm of democracy, two superimposed incompatible nations — one rich and the other miserably poor, seemed to ignore the needs of its downtrodden classes, boasting instead of its ultra modern medical system, designed to cater mostly for the wealthy and foreigners — medical tourists. Its government budgeted proportionally less money than smaller non-democratic countries, such as Vietnam, for the health of its teeming underclasses.
India’s lethargic and often corrupt bureaucracy had made little progress in addressing its sanitary problems. More than a hundred million Indians, in most cases women and young children, suffered from hunger and malnutrition. States like Madhya Pradesh lay somewhere between Chad and Ethiopia on the misery scale. Barton had witnessed the insalubrious lanes with overflowing drains, rampant diseases and thin wide-eyed children, victims of malnutrition.
In just a year the global economic system had totally changed and Barton silently congratulated himself on having got out whilst the going was good. His priority was to conserve his capital. It had not been easily earned, it was the fruit of years of work, though he had to admit his exit was not exactly according to the rules, when the sky falls in it’s every man for himself he bitterly rationalised.
Scams