Burj Dubai, Dubai World and pride going before a fall

Burj Dubai, Dubai World and pride going before a fall

Dubai has no oil. What does have is a huge free-trade zone and harbor, many banks and, until now, a considerable amount of money...and an inclination to build it on big and expensive projects. The Emirates Towers, 12th and 24th tallest buildings in the world; the Jumeriah Palm, the world's largest man-made island and, waiting in the wings, the Burj Dubai, which will be the tallest building in the world when complete.

However, as those who followed the stock markets on Friday know, Dubai World, the emirate state-owned holding company, announced that it was having problems paying its $60 billion debt. This seems very reminiscent of the real estate-based overextension that the US has had. In fact, the biggest problem is with its real-estate subsidiary, Nakheel, which owes $3.5 billion and is cash-poor at the moment; a process not helped by the halving of property prices in Dubai in the last year or so. Unlike US agencies like Fannie Mae and Freddie Mac, which whose implied backing by the US government became actual backing, Dubai World may not get a rescue package from the emirate.

The has led to a resurrection of the image of financial problems that had been hidden by an opaque process. One has to wonder if Burj Dubai well ever be anything more than an example of hubris meeting nemesis. The Tower of Babel led to a mixing of languages; however, overextension, default and financial panic are a universal tongue.

Burj Dubai, Dubai World and pride going before a fall