I've noted in this space on several occasions the
by-now dogged and suspicious habit of the Times to hype the emirate of
Dubai as a "fantastic" tourist destination. On December 9, it had two
articles shilling for travelers: One, about the Art Fair in March of 2008,
with 70 galleries participating, with a "forum [that] will bring together
different personalities to generate an East-West Dialogue on modern
art." Wow, I can't wait. The second is about Dubai as a party
destination: "Clubs Bloom in the Desert." Double wow! Frankly, I can't
think of a less interesting and more vapid place to visit than Dubai,
unless your tourism includes looking in on the near-million rightless and
woefully underpaid foreign workers "without whose brain and muscle not a
single wheel will turn." These words are from an old union hymn made
popular for the red diaper babies by Pete Seeger. See what the breezy
coverage of Dubai by the Times can drive me to do. Bill Keller, please
take notice.
And notice also that the Wall Street Journal on Friday ran a piece,
"Dubai's Debt Cloud," about whether Dubai actually has or will have
the money to back the enormous debt it has undertaken. It is far less
cheery than the hyper-encomiums on the Times' op-ed page, travel pages, art
pages, and, for that matter, business pages.
One of the salient differences between Dubai and the other emirates in
U.A.E. and its Gulf neighbors is that it doesn't have oil. The second is
that just across the lake is Iran. This applies to the other faux states
in the region also. But it is not exactly a stable area. Is it?
In any case, the percentage of Abu Dhabi's debt to GDP is 2.9%; Saudi
Arabia's, 5.3%; Dubai, 41.8%. Now, that's something.
Moreover, as the WSJ comments, financial reporting from these states is
"opaque." Dubai, especially.
Enter once again the rating agencies (Moody's, S & P, and Fitch) which have
judged most of these Gulf states as A or AA "stable." Stable? In the
shadow of Iran? And how reliable is the information on the finances of
these political entities?
Dubai "has been on a deal-making binge." Mostly with debt. But Dubai
itself has no available agency rating at all, although some of its
companies are marked as single-A-plus, citing "strong implicit support from
the Emirate of Dubai." Implicit, shmekplicit.
As we have learned in the current mortgage and insurance crisis, the rating
agencies are not to be trusted at all. First of all, they don't really
examine the books of the companies and states which they judge. And, then,
there is, as the WSJ says, "another motivation." "In most cases," the
credit-rating companies "are paid to rate the creditworthiness of firms and
governments, and the big three firms are eager for clients like the
government of Dubai." This is as devastating sentence.