Dubai has cast a long shadow over the Gulf region for much of the past decade. Only in the past couple of years has it been for the wrong reasons. In a region often plagued by secrecy, and chronic slowness, Dubai became a model of a modern Arab state. Its open economy, relative freedom, and rapid development all seemed to point a way forward for the region.
The recent debt problems have shown up the flaws in that model, but Dubai may be moving to remedy that other flaw often evidenced in the region, the lack of transparency. Part of the reason the Dubai World debt standstill announcement made such waves in November 2009 was the lack of information about what was going on. Almost a year after the announcement that alerted the world to Dubai’s debt worries, the emirate called a press conference to start communicating its new message: the restructuring was going well, and Dubai’s economy is doing better than many think.
As if to underline the importance of the occasion, Sheikh Mohammed bin Rashid al-Maktoum, Dubai’s ruler, turned up. The Government of Dubai Media Office says it may start holding press conferences every three months to help get its message out. This new spirit of transparency is welcome. In the vacuum of official information rumours often fill the gaps. By engaging with the media, and international investors through bond roadshows, Dubai has succeeded in turning opinion around about the health of the government finances economy.
There is still some way to go. The government continues to insist that its debt level is just $30bn, disregarding the debts on state-owned companies like Dubai World and Dubai Holding, which at the same time it is now actively restructuring. The release of economic data is also patchy. Dubai has created a modern hub for transport, trade and logistics. Its infrastructure is years ahead of the rest of the region.
If it wants to maintain that position while it lacks the financial resources to continue funding new infrastructure directly, it will have to make sure it is regarded as the region’s most attractive destination for foreign investment. That will require a lot more transparency.