By Ellen Knickmeyer
Washington Post Foreign Service
Wednesday, October 15, 2008
DUBAI, United Arab Emirates, Oct. 14 -- It was, one investment broker said here Tuesday, occasion for a couple of beers, but not for popping open champagne.
Arab and international financial leaders in Dubai, the dealmaking hub of the Arab Middle East, allowed themselves to relax a little Tuesday, voicing hope that the intervention of governments worldwide had averted global economic collapse.
But local and foreign financial leaders here were mindful that economies still could be headed into a long recession, and no one was celebrating, they said.
"This was a situation where, if the governments had not acted in the swiftest and boldest way, it would have had an effect that in our generation would have been unimaginable," said Stephen Schwarzman, chairman and chief executive of the Blackstone Group, the world's largest leveraged-buyout firm.
Schwarzman and the others spoke at a gathering of private-equity leaders who came to the Persian Gulf area to compare notes with each other and to court the region's sovereign wealth funds, which hold an estimated $1.5 trillion in oil proceeds.
Even if markets and banks continue their recovery, the financial wounds of recent weeks will linger for years, said Guy Fraser-Sampson, an expert in private-equity investment.
"The first world war cost a generation of men. This past month or so cost a generation of capital," Fraser-Sampson said.
"Two generations," interjected John C. Baker, head of New York-based Baker Capital.
Dubai, one of seven emirates in the United Arab Emirates, is the city that leverage built. Dubai's ruler has used the emirate's comparatively modest oil reserves to transform the state into a financial, trade and tourist hub.
The pace of building here outpaces that of Asia. Driving across Dubai now takes more than an hour, almost all of it spent passing bank towers, malls, gold and diamond trading centers, and hulking skyscrapers that were not here a decade ago.
All the building meant Dubai's government debt outweighed its gross domestic product, Moody's Investors Service warned on Monday.
Dubai's dealmakers largely shrugged off the news, they said, confident that the United Arab Emirates' rulers would use oil wealth to rescue Dubai from any trouble.
"It's hard to make an impression in the land where money is no object," a local executive with Morgan Stanley said Tuesday, speaking on the condition of anonymity.
Markets in some Persian Gulf countries lost nearly a quarter of their value in last week's market drop, but most shot back up Monday and Tuesday.
The United Arab Emirates' central bank announced Tuesday that it would make more than $30 billion available to banks in need of cash.
Some gulf area residents insisted Tuesday they had never been worried.
"The United States creates the dollars, and we create the black gold," Abdulla Ghassab al-Hajri, a businessman based in Dubai and Abu Dhabi, said Tuesday.
Hajri wore traditional white robes and head cover and stood with his hands behind his back, studying the darting fish inside a massive aquarium in Dubai's new Atlantis hotel, where rooms go for as much as $25,000 a night.
"We support each other," Hajri said of the United States and the United Arab Emirates; others here stress Dubai's links with Asia.
"Europe, Japan, China, the others . . .," Hajri said, making a shooing-away gesture with his hands.
Certainly investors here, as elsewhere, lost money in last week's market crashes, he said, but most Arab small investors already knew the markets were no place for them.
"We like real estate more," he said, cupping his hands before him. "At least there I have an asset I can hold."
After the local branch of Lehman Brothers closed at the outset of the global panic, word was that its landlord at the Dubai International Financial Center received more than 100 calls from other businesses eager to rent the space, said Sulaiman al-Hattlan, head of the Dubai-based Arab Strategy Forum.
The envious might have watched last week's turmoil, and seen Dubai as a property bubble bound to burst, Hattlan said.
"It's wishful thinking," Hattlan said. "Dubai is here to stay."
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