As we all know why Dubai is gone and will not come back.

http://www.timesonline.co.uk/tol/news/world/middle_east/article6945325.ece

THIS ARTICLE HAS BEEN CENSORED IN DUBAI.

December 5, 2009

Confidence will never return in DubaiJim McLean: Analysis

The crisis in Dubai has gone beyond debt and become one surrounding the credibility of its leadership. Dubai World’s failure to honour its obligations has shaken faith among the international investment community in Sheikh Mohammed bin Rashid Al Maktoum, the Emirate’s normally ebullient leader.

The price of restoring it is likely to be much more than just more prudent borrowing and greater transparency. It is likely to be a demand for a restructuring at the top: this means a much clearer distinction between the Royal Family, the Dubai Government and the businesses of the glittering Emirate.

“It has absolutely destroyed confidence. Who will do business with Dubai now?” said Christopher Davidson, an expert on Gulf economics at the University of Durham. “Sheikh Mohammed was hinting for years about a full sovereign guarantee behind these developers.

“The international financial community, and I know this to be the case in London, won’t do business with Dubai again,” he said. It’s a really devastating scenario.”

Last days of Rome in Dubai
Sheikh Mohammed has blamed the negative coverage of Dubai’s recent woes on the media and unnamed conspirators determined to see an Arab success story fail. That may play well with the Emirati audience but it is less persuasive to professional investors who feel they were misled. The timing of the Dubai World announcement, on the eve of a series of public holidays, created particular opprobrium. Government officials have turned off their phones.

Experienced analysts no longer trust the Government’s statistics, claiming they do not fully reflect the amount Dubai owes its foreign creditors. EFG Hermes, a regional investment bank, thinks Dubai could owe as much as $150 billion (£91 billion), twice the size of the economy and two and half times its officially declared debt. Dubai World alone owes British banks $5 billion. The extent of Sheikh Mohammed’s personal holdings in the big state-owned companies is often unclear. “We are probably talking many many years before we see a resolution,” said Fahd Iqbal, Gulf strategist at EFG.

Sheikh Mohammed, 60, who took over in 2006, has presided over Dubai’s final growth spurt. His image appears in every marble hotel lobby and public building. He is, in effect, a benign dictator, a man not to be crossed but who wants to be liked.

His grand vision for Dubai, however, is over. Even if its richer neighbour Abu Dhabi helps it out again financially, it will not be with the blank cheque Sheikh Mohammed had hoped for. He may have surrounded himself with “yes men” who sugar-coated worsening news, but Sheikh Mohammed cast himself as Dubai’s chief executive and if this were a company he would be on his way.

Such an outcome may not displease Abu Dhabi nor the United States. Dubai and Iran are trading partners, and arms shipments have been intercepted sailing from Dubai’s ports bound for the Islamic Republic.

Sheikh Mohammed’s anointed successor is Crown Prince Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, 27, but he recently made a gaffe by telling the World Economic Forum that the economy was “humming again” just days before the Dubai World crisis. Sheikh Mohammed’s older brother and official deputy, Sheikh Hamdan bin Rashid Al Maktoum, is largely unassociated with the boom and a more experienced possibility.
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Now it is the turn of KSA(Kingdom of Saudi Arabia):

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6946728.ece

Trade minister flies to Saudi Arabia to persuade defaulters to treat creditors equallyPatrick Hosking, Financial Editor

Lord Davies of Abersoch, the Trade Minister, flew to Saudi Arabia last night to try to defuse a growing dispute that bankers say could do as much damage to the Gulf’s bruised financial reputation as the Dubai shock of ten days ago.

Bankers are furious that two defaulting Saudi conglomerates that owe $20 billion (£12.2 billion) appear to be favouring local banks over foreign creditors. State-owned Royal Bank of Scotland, HSBC and Standard Chartered are all understood to have exposure to Saad Group and Ahmad Hamad Algosaibi & Bros (Ahab). Dozens of other Western banks are also owed money, including Citigroup and BHP Paribas.

Bankers suspect that the two family-owned businesses, which defaulted over the summer, have privately reached agreement with local Saudi banks over restructuring their loans while leaving foreign banks in the cold. One senior banker told The Times yesterday: “Local banks appear to have been given preference.”

The dispute, unless resolved soon, is certain to trigger fresh concern about doing business in the Gulf in the wake of the Dubai calamity. Dubai World, a Government-owned conglomerate, stunned global financial markets last month by announcing a standstill on paying interest, sending bond markets into a tailspin.

Lord Davies is embarking on a trade mission with 40 senior British business figures, visiting Jedda and Riyadh. The trip was planned months ago, but the Saad row adds urgency.

Lord Davies, a former Standard Chartered chairman, is scheduled to meet Ibrahim Abdulaziz al-Assaf, the Saudi Finance Minister, tomorrow and is expected to spell out the concerns of British banks. He will also meet the Saudi Arabian Monetary Authority, which triggered the dispute when it revealed that Saad had reached agreement with local banks in September, a claim that Saad has denied. There are also unconfirmed reports of Saudi banks seizing Saad assets as security. It is a fundamental principle of international banking that all creditors holding similar debt securities be treated equally in the event of a collapse.

The dispute is diplomatically sensitive, coming after allegations of corruption involving British Aerospace and Saudi officials. An investigation by the Serious Fraud Office was dropped in December 2006 on the ground of national security.

A further complication is that Saad and Ahab are at daggers drawn. Ahab has accused Maan al-Sanea, the Saad chairman, of a fraud that could amount to $10 billion, an allegation that Mr al-Sanea rejects.

Angela Knight, head of the British Bankers’ Association, said yesterday: “This is an important issue for our members and one we would like to see resolved as calmly and quietly as possible.” A leaked letter from the association to Lord Davies two weeks ago asserted that the handling of the affair by the Saudi authorities was doing “enormous damage to the reputation” of Saudi Arabia. The dispute between the businesses was bringing the Saudi system of corporate governance into disrepute, it said.

Bankers are hoping that the potential damage to the reputation of Saudi Arabia will convince ministers there to put pressure on the companies to treat all creditors equally.

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Sunny Leone a true Canadian DESI now back in India !.