December 2, 2009

The Dubai 'miracle' was always a mirage of spin (related from 2007 - Prescient about Dubai?)


NOW that the external impact of Dubai's sovereign debt crisis seems to have passed, for now at least, what's the big lesson from this drama-in-the-dunes?

I think it boils down quite simply: don't believe the hype. Dubai claimed to have the ''biggest this'', ''largest that'' and the ''most of just about everything'' but, more to the point, it had the world's fiercest concentration of PR spruikers, many of whom have left their Porsches and Audi A4s at the airport (which would become the ''world's biggest'', as they used to claim).

At their specious best, it was almost as if Dubai's flacks circulated a checklist of unverifiable nonsense. The world's most cranes? Check. The world's biggest building site? Check? The world's best practices of corporate governance? Check? And spell-check ''new paradigm''? Done.

Dubai was a triumph of hype over substance that, after the horrors of 9/11, the world wanted to believe would blossom beyond its borders and transform the Middle East. It overwhelmed investors with hype while shielding its remote Emirati monarchs from reach and accountability as they ''managed'' by birthright the flag-carrying Nakheel or Dubai World or the Potemkin corridors of conflicted regulators overseeing this unchecked free-for-all. As undertakers pick through Dubai's corporate carcass, I suspect they'll encounter much the same lack of access.

In February last year, I wrote that Dubai's ''new paradigm'' was built on a rather ancient one - slave labour. I described a Middle Eastern Soweto of 300,000 ''guest workers'' called Sonapur, a rundown camp concealed in the dunes between Sharjah and Dubai. Without the guest workers, Dubai's architectural bling, its spas and tax-free splendour wouldn't exist. Sonapur - the City of Light in Hindi - is where illiterates from the impoverished rural villages of the sub-continent who build Dubai are housed in some of the most depressing conditions I've seen, with 12 people sleeping in rooms built for two to four, using the beds in shifts.

Dorm lights burned 24/7, and shift changes meant constant hubbub; cooking, prayer, ablutions, mobiles chirruping, buses. Its a dystopia that should shame Dubaians, if they knew much about it. Or cared.

Dubai was also a big winner from 9/11. Arab money that would ordinarily have found its way to Europe and North America got speculatively parked there, because its owners felt discriminated against when travelling to the West with Islamic names.

Sheiks don't much like taking off their shoes, getting patted down and interrogated going through immigration channels, so they headed to Dubai instead to party and spend.

But to cite Sonapur and 9/11 among Dubai's newly minted tycoons was like telling your wife that ''yes'', her ''bum did look big in that''. It would prompt a furious reaction because you dared to question Dubai's specious success. Collingwood's sponsor, state-owned Emirates Airlines, railed to me that "our human resources policies are heavily guided on international best practice and we undertake considerable international benchmarking". Then it admitted it paid its baggage handlers about 2000 dirhams a month, which it said was "comparable to other international carriers".

That salary is about $A7000 a year, which is less than a Melbourne-Dubai business-class return ticket. Qantas is Emirates' comparable long-haul competitor but if Alan Joyce paid wages like that to Tullamarine's baggage handlers, a banker's Dubai-bound bags would never make the hold, let alone the carousel at the other end. Dubai's business plan was if an Emirati Emma Lazarus might've said: ''Give me your tired, your poor, your huddled masses and we'll exploit the hell out of you.''

But mixing a heady cocktail of lavish junkets and arm-twisting hype, Dubai's army of flacks believed their own press releases. They convinced themselves that somehow the Al-Maktoums had recast capitalism's wheel. Sheiks were presented as having conceived something uniquely Dubaian, impossible to replicate elsewhere. In truth, their ''vision'' was much the same nonsense I imagine Bernie Madoff and Allen Stanford sold and Lehmann spruikers sold to rapt rural Australian councillors.

I heard it from Alan Bond before he went to jail, and from Nerdistan's geeky fatboys in the late 1990s Silicon Valley, almost anywhere in South-East Asia circa 1996 and sometimes from those ubiquitous Australian infrastructure funds.

Doubtless 17th century Dutch tulip vendors had people believe they were the smartest guys in the hothouse.

It had the same allure as a line of black dresses and sharp suits pressing the red sash of a fashionable club. Dubai compelled main-chancers to rush where the action was, because it wasn't so much Wall Street any more, and Perth was cliquey. Subliminally, it suggested one great shot at fast money where one didn't need smarts, a reputation or to work too hard. Showing up was virtually enough to add another crane to the horizon.

That all got gushed into the Dubai Miracle, devoured by subprime-savaged bankers and cashed-up bogans remaking themselves some place where no one much knew or cared who they were - fertile ground for the AFL, which staged a match there last year. It featured Eddie McGuire, of course.