A very different approach was on display in Dubai where an open forum was held last week. For the first time in months, representatives of the government and the major entities that owe billions to various financial institutions held court with reporters. Key decision makers in Dubai showed up to report their optimism, particularly since it appears that tourism and trade are beginning to recover, but few details were provided. Such an event suggests that the terms that financial institutions are willing to offer for debt restructuring are far better when no government bailout is forthcoming. Apparently, when there is no prospect of a publicly financed rescue and liquidation of the entity that owes them money, financial institutions can be quite patient. They are willing to cooperate while a large debtor considers when and which assets will be sold to pay them. Instead of being hounded by creditors and haunted by the looming threat of forced bankruptcy, those that owe billions in Dubai are being chased by investment bankers who want to help sell assets and restructure payments. In addition, government-related entities can buy time with such tactics to avoid selling at fire-sale processes. Indeed, the committee considering selling stakes in some of Dubai's assets to fund payment of the debt indicated that they would only be sold at the right return. The prospect of being able to buy stakes in the cash cows of Dubai left the audience focused on that future possibility rather than the difficult restructuring task ahead.

Contrasting the restructuring of the debt of Dubai with bank and national bailouts in the West offers some interesting observations. State actors in the West, despite being reputed to be powerful players on the world financial scene, acceded to the demands of the banks and financiers. Despite having made the mess, the financial executives were able to dictate the terms of the clean up. After receiving billions from the AIG bailout, Goldman Sachs made a big show of using a tiny portion of this cash to repay government loans they had received at the height of the crisis. Then they proceeded to pay generous bonuses to the very executives who had contributed to the crisis. It seems that being able to ensure that the government covers your losses is an important part of effective managerial performance in the capitalist, democratic US.

Throughout Europe and North America, few high level executives lost their jobs despite occupying important roles in creating the global financial crisis that contributed to the situation in Dubai and has resulted in the worst economic downturn since the Great Depression. By contrast, Dubai, like Malaysia during the 1997 currency crisis, refused to do what the banks and financiers demanded. Decision makers in Dubai have followed their own counsel about how to handle the situation that followed the global financial crisis. In so doing, they have demonstrated that the demands of financiers are open to negotiation and that the terms can be fairly different when government coffers are not open for the relief of bankers. My point here is not to offer a complete analysis of how this will ultimately affect the ability of Dubai and its core companies to participate in world financial markets. However, when the naysayers spin their worst-case scenarios, I am reminded that many of the same talking heads were ready to write off Malaysia after it took its own course during the Asian financial crisis of 1997. More immediately, I contemplate the wrenching and damaging restructuring of debt that is taking shape in the West. My conclusion is that there might be some benefits to the take-it-or-leave-it restructuring that is being pursued in Dubai.
 
(Stephen Mezias, Abu Dhabi Commercial Bank chair of international business and academic director of the INSEAD Abu Dhabi campus)