'Tis but thy name that is my enemy;
Thou art thyself, though not a Montague.
What's Montague? It is nor hand, nor foot,
Nor arm, nor face, nor any other part
Belonging to a man. O! be some other name:
What's in a name? that which we call a rose
By any other name would smell as sweet;
So Romeo would, were he not Romeo call'd,
Retain that dear perfection which he owes
Without that title. Romeo, doff thy name;
And for that name which is no part of thee,
Take all myself.
- William Shakespeare (Romeo and Juliet)
As
the newsreader announced the grand official opening of the
world’s tallest building on Monday called the Burj Khalif (renamed from the
Burj Dubai after the first name of the ruler of neighboring Abu Dhabi, which
last month rescued Dubai Inc from a debt default), cue the video of a bunch of
fireworks being fired off the rocket-shaped building, a whole range of thoughts
populated my mind:
a. Did creditors get free tickets to watch their money burn, quite
literally? b. Will those fireworks hit Iran and spark off the next world war? c. Do they have a small plaque at the bottom honoring all the slave
labor from South Asia who actually built the dang thing in 50-degree Celsius
heat?
d. Is there someone else out there who "needs to compensate even more",
that is, build a taller building anywhere in the world? e. Did they also sell T-shirts reading "$10 billion and all I got was
this lousy name"?
A number of these questions are tangential to the main one - namely, how
changing the name of the building was tantamount to accepting a change of
business model; from a proud wannabe to a more humble let-me-be.
In days gone by, Dubai was the brash new kid on the Arab block; one of the
seven emirates in the United Arab Emirates (UAE) in a hurry to usher in a
business model that eschewed the region's traditional resource-dependency that
propped up the regimes of Saudi Arabia and even neighboring emirate Abu Dhabi
in favor of more sustainable revenues arising from tourism, transport,
logistics and financial services.
The business model changes didn't quite signal that the political regime had
changed in any way - after all, democracy was seriously frowned upon, and as
for human rights, well one only needed to ask the laborers marshaled to build
the towering castles in the sky. An investigation by the United Kingdom's the
Sunday Times newspaper in 2007 revealed the following:
... But less
than four miles [six kilometers] from the resort stands the bleak desert camp
of Jebel Ali, a sprawl of breeze-block huts and battered trailers where about
10,000 construction workers - including many from the Palm Jumeirah - are
crammed into stifling dormitories at the end of the day.
They sleep up to 15 to a room, each with a flimsy bunk bed, a thin mattress and
dirty, bug-ridden sheets. They cook their paltry meals on mini-stoves and squat
on the ground to eat. One resident spoke of a strike four months ago over a
shortage of lavatories.
The conditions reflect the meagre wages for a working week of six and often
seven days. Many of the men believed the assurances of recruiters in India,
Pakistan and Bangladesh that they would make enough money to support their
poverty-stricken families back home, but have since become trapped in a spiral
of debt and despair ... The UAE government was jolted last year by a revolt of
2,500 laborers at the Burj Dubai tower. It promised to improve conditions and
fine companies for late payment of wages. Yesterday it emerged the government
was considering introducing a minimum wage ...
... Dissent on construction sites is swiftly stamped out. Two weeks ago 250
workers on the Dubai marina were deported after an 8,000-strong crowd demanded
a 25p (40 US cents) a day rise in their monthly income of ฃ75 (US$120) -
ฃ85. Some have had no pay increase since 1990. (The Sunday Times, March
25, 2007.)
Then there is the number of scandals about the
actual conditions under which the laborers, many of whom were unpaid for months
on end, worked. Of the many allegations that made the rounds, perhaps the most
interesting was the one that the government under-reported temperatures during
summer, always ensuring that daytime temperatures were recorded below
50-degrees Celsius. This was due to a quirk in Dubai's labor laws that
permitted workers to take time off when temperatures soared above the level.
Your columnist is an eye-witness of sorts to this, having noted the in-car
temperature indicator showing 53-degrees Celsius when the government announced
48-degrees Celsius; when pointed out to the dealer that the thermometer was
incorrect on the car, his reply was "sorry sir, but it is the government figure
which is wrong"; as evidence, he showed a certified medical thermometer that
had the same reading as the car. And yes, the workers could be seen beavering
away at the site of the Burj on the day this happened.
Away from the scandals of how poor South Asians were mistreated, which in any
event only put Dubai on par with the rest of the Middle East in this matter,
the key difference was the scale of ambition shown by the emirate, especially
relative to the size of its gross domestic product (around US$80 billion).
Funded with tens of billions of debt from banks, the property projects that
dotted Dubai's landscape and its coast - in the manner of gargantuan
reclamations of the type that made Asian cities like Hong Kong appear
positively amateurish in comparison - soon metamorphosed the city from a
smugglers' shopping haven to an Arabic version of Iceland.
The trouble with all the borrowing is that, eventually, folks want their money
back. In case you haven't, as a borrower, managed to sell enough developments
to fund this repayment, trouble promptly ensues. It happened in the United
States from 2007 onwards, pummeled Iceland in late 2008 and caught up with
Dubai in 2009. When Dubai declared that its "implicit" guarantee on the
obligations of monarch-owned companies wasn't worth the paper they weren't
written on (don't you love the use of double negatives in a sentence), a number
of investors feigned surprise and markets promptly sold off around the world,
due mainly to the US Thanksgiving holiday, which had induced a turkey-overdose
stupor on all investors that forced them, for a change, to acknowledge reality.
Come the key date - December 14 - and instead of a default on the Nakheel Sukuk
(Islamic bond), there was instead a reprieve, with Abu Dhabi entering the
picture and promising to "assist" its brother-emirate in repaying the debts of
the lenders. Crisis averted, the bonds went back to par but also created enough
optimism to help global asset markets for the following two weeks that ran,
conveniently, to the end of calendar 2009.
There is another truly amazing aspect to this drama, lying in the little-known
details of trading in the Nakheel Sukuk maturing on December 14. Traditionally,
in the few weeks before a bond matures, about 5% changes hands because very few
investors want to give up money that will be made available very soon in a
repayment. In the case of the above bond though, over 50% of the $3.4 billion
Sukuk changed hands (some say over 75%) with the main sellers being from Abu
Dhabi and Dubai, and the buyers almost overwhelmingly being London and
Asia-based investment funds out to make a small profit. After the announcement
of the default on the day before Thanksgiving, prices dropped quickly to around
40-45 cents on the dollar (from 110 cents on the dollar before the
announcement).
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