Wednesday, July 01, 2009

Don’t be a Dubai debtor

PD*25942451 Dubai has gone from one of the most exciting booms of recent  years to “its worst crisis since the UAE's founding 40 years ago,” with failing entrepreneurs now fleeing the country to escape debtors prison, with one back predicting “the city's 1.4 million population could shrink by almost a fifth.”

And yes, you read that right. Debtors’ prison.  "According to police there are 450 people in Dubai's central jail imprisoned as debtors which highlights how seriously the UAE authorities view bankruptcies,” says Nick White of Dubai-based Trowers & Hamlins.

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7 Comments:

Anonymous Anonymous said...

Well, yup.

As a Dubai resident, I can only rub my hands in glee. I currently pay 84,000 Dirhams in rent - to renew in September, the price will be 60-70,000 Dirhams.

Moving here makes it too easy to buy the new Toyota Landcruiser or GMC SUV 20-30% below what you'd pay at home. Credit's easy, and if you're white, even more so.

Go mad - get hooked on the sunny villa lifestyle, get it all on credit and have fun.

They call them "Jumeira Janes" - named after Jumeira Beach, near the Burj Dubai. The elegant wives of high-flyers, doing the coffee and chardonnay curcuit after the gym, then relaxing in the sun.

No more. BBC Panorama (I think) made mention of one now living in a car, after her husband became sick with a brain tumour, losing all their cash.

No money to pay the creditors, and no money to leave the UAE. She survived off the charity of the slave-labour workers from Bangladesh and India, who gave her food. They probably earned no more than NZD700 a month. Some earn 30 pence an hour, then have most of it taken back by the employer for "Fees" or "Meals and housing". Their passports are confiscated, so they can't leave the Country, even if they wanted to. The "free market" here is a sham.

When we moved to the UAE, I bought a cheap car off a friend for 1000 bucks. It goes. It's nothing flash. I just had to spend about $1000 replacing the airconditioning system. But it's mine, and if I want to abandon it at the airport I can. No debtor prison for me!

Dubai, as an Emirate, produces nothing. It just shuffles and launders money. It is a city of financial houses, and malls. A place where tourist ships dock, and the voyagers are whisked away to spend money at the shops, and tacky Chinese-made camel souveniers.

Abu Dhabi, however, produces oil - and lots of it. It goes back to the basics of economics - production of goods will have more benefit to society, than just moving cash.

There are plenty of skeleton buildings here, with nothing being done to them.

A work associate bought an apartment 2 years ago for about NZD250,000 - a year ago it was worth NZD450,000 - now, probably NZD350,000. Just for a small concrete cage in a desert.

Dubai is a city built on lies, and one day, it will be caught out.

Elliot.

7/01/2009 04:33:00 pm  
Anonymous Anonymous said...

Oh yeah - forgot to mention...

The tax-free income is great! Saved more money than I ever did under the ruthless control of Helengrad.

Too bad Keynsia is no better.

And, by the way,the variety of food here is fantastic!

7/01/2009 04:52:00 pm  
Blogger gregster said...

Interesting good post Elliot.

7/01/2009 05:01:00 pm  
Blogger Paul said...

This can only be good for Architecture.

7/02/2009 01:25:00 am  
Anonymous LGM said...

Elliot

Thanks for posting that. Very interesting. I think I'll need to visit and take a look around.

What do you reckon would occur to NZ if John and Bill were to run it along similar tax lines to Dubai?

LGM

7/02/2009 07:41:00 am  
Blogger Cactus Kate said...

I like the idea of debtors prison. Especially for shylocks who have the money to pay but wont pay on time consistently, will welch on anything they owe and otherwise bring those with better business practice into disrepute.

LGM - dream on,,,unfortunately. The NZ bludger mentality has ensured this never happens.

7/03/2009 07:16:00 am  
Anonymous Anonymous said...

Hi LGM

It's very difficult to compare the UAE and NZ. One is a high tax socialist country, the other is a low tax feudal monarchy.

Sheikh Mo - or to use his full title "Sheikh Mohammed bin Rashid al Maktoum, Vice President and Prime Minister of the UAE, and Ruler of Dubai" (Try saying it in one breath) here is spending billions to develop Dubai as a business centre - his father had the brains to realise that the oil under Dubai was running low, and needed to source income from other means.

The law and regulations here in Dubai / UAE are quite weird. A business must have part ownership by an Emirati, unless it is based in what's called a "Free Zone" where companies may set up and operate without local investment.

Put aside all criticism of the last 18 months financial performance, and you can see that the UAE - Dubai especially - has gone from a small fishing village, to mega-millions in 30 years.

If NZ cut tax rates, and actually encouraged businesses to invest and thrive, NZ would be a totally different place.

My apartment overlooks Dubai airport.

Dubai is about the same size as Auckland, and the whole UAE population is about the same as NZ.

If I look out the window, and don't see a stream of Boeing 747 / 777's on approach, the airport is probably closed due to fog. You don't get that much international air travel in and out of Auckland.

Air travel is a key indicator of financial success. Dubai is building a new airport at Jebel Ali - it will have 6 parellel runways.

So, although some aspects of UAE life are very very poor, others are making the wheels turn. If people don't come here, they at least pass through here enroute, spending money.

To summarise - tax cuts in NZ would make the country thrive.

Elliot.

7/03/2009 08:28:00 am  

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