Monday, July 13, 2009

The Economist headline: "Trouble in the UAE"

From The Economist:
For the first time since the seven Gulf statelets joined together as a union in 1971, people are beginning to mutter—rather quietly, for sure— whether there may be something amiss with the autocratic, opaque system that hitherto seemed to work so well behind closed doors. “Nobody really knows what any of the statistics are,” says a Western analyst. “We haven’t seen the half of it yet,” says a Western banker, referring to the debt and the possible defaults. It is notable that almost nobody in business or government is prepared to talk publicly. Cohorts of public-relations people surround the bigwigs and shield them from scrutiny.
...
In the short run, the much richer and more conservative state of Abu Dhabi, with 90% of the UAE’s oil reserves, will bail out its miscreant, extravagant neighbour, along with the other five, poorer statelets if they need help too. “In the long run, Dubai has enough assets to tide it over,” says a banker in Abu Dhabi, pointing to Dubai’s huge container trans-shipment business, its airline, aluminium smelter, tourism, and role as a regional services hub. Above all, Dubai and Abu Dhabi are too enmeshed to allow one part to fail.

Indeed, the Dubai disaster may prompt Dubai’s Maktoum family and Abu Dhabi’s ruling Nahyans to strengthen the federation and work towards a system of greater accountability and openness. A half-appointed Federal National Council is toothless, though it can now call ministers before it.
...
Abu Dhabi is ahead of Dubai in terms of government openness and efficiency. But in both the emirates all the big decisions are still taken behind closed doors. In the mild words of a diplomat, “neither Abu Dhabi nor Dubai are very good at clarity in decision-making.” Vital decisions are often not put in writing.

The aim of the two ruling families has been to modernise and open up the economy without modernising or opening up the politics to the extent that the people might one day dispense with their royal rulers. In the short run, there seems little chance of that happening. The expatriates who manage much of business have little say in the running of the place, but are generally content to live well and ask no questions about delicate matters of state. An English-language newspaper, the National, backed by the Nahyans, has opened a healthy space for discussion, though royal scandals or provocative words like “bail-out” or “in denial” are virtually taboo.

The indigenous emiratis, who count for less than a fifth of the 5m people living in the UAE, have hitherto been mollycoddled by benevolent rulers. In a couple of years, a recovery may ensue. A resurgence of oil prices is helping. But if the economy gets stuck, the glory days, at least of the Maktoums, may be numbered.
Read it all.

The economic decline has made it more difficult to quiet elements of dissent. The balancing act of maintaining power has become more difficult. The kerfuffle of over admission of Jewish tennis players is but example -- the rulers would never have allowed that to happen in the past.

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