We learn that the “banks”, and presumably their customers who bought bonds issued by some of the entities currently being administered by Dubai World (note I did not say owned), will be sitting down in the near future to have a little chat about the “holidays”. We also learn that RBS, the UK State-Owned Bank, is one of the main foreign creditors of the current object of everyone’s attention, the developer Nakheel.
There is a saying that if you owe a bank $100,000 you have a problem, but if you owe it $5.6 billion, they have a problem. That’s particularly true if the bank doesn’t know exactly who it is that owes it the money, what collateral it can collect in the event of a default, or even how to actually collect on any collateral (if it finds any).
In such circumstances, faced with the option of “shutting-up” and getting in the queue, or creating a fuss? Well perhaps that’s just what the unfortunate creditors need to do?
Ah, the cruel injustice of it all!
Sentiments of the foreign media were neatly encapsulated in the leader in the Financial Times last Saturday which concluded
Abu Dhabi should give whatever help is needed to bring this episode of incompetence to a close. Abu Dhabi allowed it to be believed that it was backstopping Dubai, so it should make good on its promises. This will require a public guarantee of Dubai’s debts – and soon. The reputation of the whole UAE depends on it.
Strong words indeed, did you spot the deliberate mistakes?
How about some facts?
1: Nakheel is a private shareholder limited liability company, unlike RBS it is not “state owned”.
2: It is not clear who the main shareholders are, not that it really matters since it is a limited company.
3: It’s not crystal clear either where Nakheel is registered although it’s probably in the Jebel Ali Free Zone. A clue there is that foreigners can own property developed by Nakheel outright which they can’t in the parts of UAE that are exclusively governed by UAE Federal Law, also as some employees of Nakheel are finding out, labour contracts issued by Nakheel are not enforceable under UAE or Dubai Labour Law.
4: In that respect The Jebel Ali Free Zone is in some ways, technically, not part of the United Arab Emirates,…
