The Dubai debt crisis is not fazing Kiwi expats who see it as an epicenter of opportunity for career and lifestyle.
State-owned, investment-vehicle Dubai World, which manages operations including the Palm Islands, The World Islands, and Dubai Ports, recently sought a six-month delay to part of its US$59 billion debt obligations.
Commentators, such as analyst Alan Goldman of fund manager Goldman Henry Capital, predicted Dubai World’s situation would cause investor panic with contagion spreading throughout the Middle East. Fears ran high this would be seen as a financial meltdown similar to those that took place in Iceland and Latvia.
But overall markets have realized the issue is more a blip on the radar than the beginning of a whole new credit crisis.
Jonty Fernandez, 30, an operations manager from New Zealand living in Dubai, says it is an even more desirable destination now.
Rent pressure has dropped for one thing, which Fernandez says is good because “it was just squeezing you; it didn’t matter how much you earned; it became a real issue.”
He commutes to work in Abu Dhabi for an exhibitions company and is not attracted to returning to New Zealand yet.
“The expat lifestyle in the Middle East has still got a heck of a lot to offer the right sort of person – the opportunity to go up the ladder a bit quicker, work for some big brands, and play a constructive role in building the economy.”
Over the past decade, Dubai diversified its economy away from dependence on declining oil reserves, but its accumulated debt obligations are estimated to amount to US$80 billion.
Much of its assets depend on tourism, shipping, construction, and real estate, which hit trouble during the global downturn.
Bailout negotiations between Dubai and its wealthy confederate Arab Emirates state, Abu Dhabi, are complicated by geopolitics. Dubai maintains close ties to Iran, which Abu Dhabi, a close ally of the United States, is pressuring it to sever.
Fernandez says the state has moved in line with the World Bank and World Trading Organization, remaining progressive and booming. Infrastructure projects are going ahead – “it’s a building site.”
He says he’s not rolling in cash but can cover debt at home and a nice lifestyle with plenty of travel.
Dubai’s proximity to other locations offers the former champion skier the ability to fly to the Himalayas to ski in 3.5 hours, to Costa Brava for sky diving in six hours, or in three hours, be in Beirut where he will run a marathon to raise money for charity.
World-wide domino effect
The most recognizable corporations directly associated with Dubai World and its international investment arm, Istithmar, are London Stock Exchange, J Sainsbury, Standard Chartered Plc, MGM Mirage, and Porsche. But it also has stakes in a hedge fund and asset management company in New York.
European stocks suffered the brunt of the shock, and indices throughout the region dropped more than 3 percent. Emerging market indices were also hit but less severely.
As more clarity over the debt obligations came, traders focused the sell-off on European banks, which had a large proportion of exposure.