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Dubai, he said, was going through a 'healthy' correction to property prices. Yes, the emirate did owe about $10bn in sovereign debt, with an extra $70bn owed by 'affiliated companies,' but Alabbar said its $350bn in estimated assets would be more than capable of meeting these obligations. As for the rescue of Amlak and Tamweel, Alabbar said it was an example of how Dubai's economic advisory council would act in a timely and transparent manner under his leadership.
But even Alabbar could not mask the growing importance of Abu Dhabi, seat of the United Arab Emirates' federal government, when it came to Dubai's future. He underlined Dubai's 'proud identity' as part of the seven-member UAE, and said that countrywide measures to bolster the federation's financial system were a reminder of economic unity. 'We stand by our guarantees, as one country,' he said.
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These words were a major turning point, according to Christopher Davidson, a British academic and author of several works on the UAE. For most of 2008, he said, Dubai's technocrats would have been flying the flag of autonomy, backing the emirate's past tendency to resist the centralizing, federalist urges of neighbouring Abu Dhabi.
But with the financial crisis squeezing credit flows and pushing foreign investors to withdraw to less risky climes, the power balance was now shifting to Abu Dhabi's healthier balance sheet and political clout.
Budget surplus
Abu Dhabi has built up a huge budget surplus over the years, thanks to its lucrative oil revenues, state-backed investment funds and its unwillingness to splash the kind of money that Dubai is prepared to spend.
Oil-starved Dubai relies more on international capital flows, leaving its balance sheet less able to withstand shocks to the financial system. The result is an expected deficit of $1.1bn this year, according to a Reuters interview with Dubai official Nasser al-Shaikh.
But this is not simply a rerun of the past year's credit crunch, with Abu Dhabi as the US Treasury bailing out Dubai's deregulated Wall Street. Don't expect part-nationalization of flagship firms any time soon.
The two emirates are more like rivals competing for global leadership on a number of different playing fields, from tourism to aerospace. That means Abu Dhabi's own growth plans could benefit from a slowdown in Dubai, while discreetly making sure that the fallout is contained.
'Abu Dhabi has been crowding into several spaces that Dubai is trying to command,' said Jim Krane, author of a forthcoming book on Dubai, The Story of the World's Fastest City.
Staff Reporter
