![\"dubai-02\"](\"https:\/\/biznews.fiu.edu\/wp-content\/uploads\/2009\/11\/dubai-02.jpg\" "\\"dubai-02\\"")
<\/a><\/p>\nYet, Dubai World\u2019s debt is less than the $80 billion Dubai itself currently owes its bankers and investors. While U.S. banks, fortunately, have little exposure to Dubai World bonds, European financial institutions will be taking a hit, with British lenders HSBC and Standard Chartered facing possible losses of $611 million and $177 million respectively.<\/p>\n
Just as investors naively, greedily, foolishly thought that the real estate markets in Florida, Arizona, Nevada, Ireland and Spain would be in perpetual ascendancy, so too did many lenders and investors in Dubai—particularly its oil-rich neighbors within the United Arab Emirates. (Dubai derives only 6% of its GDP from oil.) Abu Dhabi, the oil rich capital of the Emirates, will most likely help with a bailout.<\/p>\n
Will there be collateral damage to other emerging markets from the Dubai calamity? The media Cassandras have already swung into action. The November 28, 2009 issue of the International Herald Tribune<\/em> posted: \u201cConfusion and fear spread over Dubai\u2019s debt\u201d and added the subheading \u201cWorry grows that emirate could be a canary in a mine for indebted states.\u201d<\/p>\n While it is true banks and investment institutions are highly reluctant in the current economic environment to lend or take an equity position not only in emerging markets but in industrialized nation ones, as well, this has little to do with the Dubai situation. Countries like Greece, Lithuania, Argentina, Belarus, and a host of other nations were in financial trouble (of their own making) prior to the Dubai World \u201cpayment delay.\u201d What remains to be seen is whether Dubai\u2019s oil-rich Sunni brethren in the Gulf States will come to their financial rescue with the quantity of funding and terms that will allow them to get over the current rough patch and return to creditworthiness as well as whether the political risk environment in the Gulf States will turn worse in the near future. While there are segments of the Arab population that enjoy the fact that there is a moral \u201cdemilitarized zone\u201d in the Middle East where they can gamble, drink, secure female companionship and enjoy the luxury, extravagance and world-class shopping that Dubai is known for, there are many others who vehemently object to a milieu that they view as anti-Koranic. And no doubt many in the Arab world are none too happy that Dubai appointed a debt advisory team from Rothschild, a highly respected financial services firm of Jewish origin, to help restructure Dubai World and dispose of a significant portion of it assets.<\/p>\n The Dubai debacle may have jolted stock markets around the world but the essence of the problem is one of liquidity, not solvency, of a borrower nation whose reach exceeded its grasp and will now have to retrench. If other emerging markets and their sovereign wealth funds learn from Dubai\u2019s debt crisis, then the misfortune having befallen one nation could well prevent larger and more widespread financial calamities in the future.<\/p>\n<\/a><\/p>\n
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