The front page of Britain's Daily Mail from late November 2009, soon after Dubai World announced its intention to restructure US$25 billion of debt, screamed loudly and aggressively: 'Bye bye Dubai.'
An expanding economy should keep Dubai healthy
I look at the image whenever I want to remind myself of two things: the stupidity of some sections of the British press, and the ability of Dubai to overcome adversity.
Of course Dubai didn't fade away back then. In fact, given the fundamental financial strength of the UAE, there was never a real possibility of that. As is often the case, the headline writers of Fleet Street went for a cheap rhyme rather than a statement of fact.
But that doesn't mean the 2009 crisis was an insignificant event. It called a halt to the great Dubai boom of 2002-08, and has framed the financial and business debate in the emirate ever since.
Two recent pieces of analysis by eminent research houses highlight the role debt has played, and continues to play, in Dubai's financial thinking.
The crisis is over, the economy has recovered, and transport, trade and tourism are booming. But policymakers and financiers are still having to deal with the legacy of debt built up in the boom days. Like in many other countries, Dubai is learning to adjust to a world of semi-permanent indebtedness.
The first piece of work comes from Bank of America Merrill Lynch (BAML), which knows a thing or two about debt itself, having been bailed out by the US taxpayer in 2008-09 to the tune of billions of dollars.
"The growth recovery and fiscal consolidation plans are easing debt dynamics at the Dubai Government sovereign level ... appeasing our previously voiced concerns on debt dynamics at the central government level," says BAML.
The report praises the Dubai Government's strategy of gradual fiscal consolidation, aiming to balance the budget by next year.
BAML says it had a presentation from the Dubai Department of Finance in preparing the report, which makes two little snippets particularly telling.
One is the level of support that the Government has derived in the form of loans from Emirates NBD. This has risen each year since the crisis, to stand at $21.5bn by the end of the first quarter of this year. The bank has been a mainstay of government strategy over the past five years, but I suppose that is what a "national banking champion" is for.
The second little aside in the BAML report relates to the ongoing situation of Dubai Group, the last significant part of Dubai Inc in need of restructuring to the tune of $6bn owed to bank creditors.
"The new entity may be spun off from Dubai Holding [its current owner] and lenders would have board representation," says BAML, presumably on good advice. If so (and we await confirmation of the Dubai Group settlement any day now) that would be an important first for the emirate. Creditors would welcome the board seats, even if they would rather have had equity as well.
The second piece of work is from Capital Economics, the London-based research house that doesn't shy away from hard-hitting conclusions.
"Is the worst now over for Dubai?" asks CapEcon, before answering: "not entirely." What worries William Jackson, the author of the report, is the "sheer scale of the liabilities accumulated in the boom years".
He estimates that public and government-related enterprise debt stands at 90 per cent of GDP, split roughly half between government and "Dubai Inc" debt.
The sovereign debt burden, at 40 per cent of GDP, is small by international standards (think Greece at 160 per cent, or France at nearly 90 per cent), and a large chunk of it consists of the $20bn debt owed to Abu Dhabi, maturing next year.
What will happen with this debt remains to be seen. The capital was supportive of Dubai in its hour of need, and if anything financial relations seem to have got closer between then and now.
The debt issue is still there, and will be for years to come, but an expanding economy and high regional energy prices probably mean Dubai can handle it. I doubt you'll read about that in the Daily Mail though.