Cure for crisis of confidence

source The National

Most observers would agree that Dubai is experiencing an economic crisis of unprecedented proportions. Commentary on the crisis focuses on the inter-related issues of housing, inflation, property and debt. It has been officially disclosed that Dubai’s public sector debt is approximately $80 billion. In the absence of more detailed and more current data, the investor’s apprehension is inevitably compounded by uncertainty. In any case, real estate seems to be at the heart of the crisis. Yet in principle, a well-diversified economy such as Dubai’s, with autonomous “locomotive” sectors such as external trade, manufacturing, tourism and transport, should not be so vulnerable to a correction in the property market, especially one that was long anticipated.
In essence, this seems to be a crisis of confidence. And if so, the solution is to rebuild confidence in Dubai. What should Dubai do? May I suggest a key word: transparency. Firstly, Dubai should now document, fully and frankly, the state of its economy. Let us see the economic data -– quarterly, monthly and weekly. Let us see, without fear or favour, all the facts that consumers and investors expect in a modern economy.
Secondly, Dubai should credibly present its economic situation to the world, through voices in which all parties, domestic and international, may place their trust. If the strengths outweigh the weaknesses (as surely they do), there is nothing to be lost.
Thirdly, Dubai should develop and implement an action plan to ensure that confidence in Dubai is never again in doubt.
Dr Robert A Edwards, Edwards Economic Research, Dubai