Standing, shaking, in the aftermath of the Eid Holiday

So... it has been quite a mental Eid weekend that we are now emerging from, rubbing our eyes and wondering if the world is a couple of degrees skewiff from its axis.

For the uncaring, uninterested (um, click away now, this could turn in to a rant..), or just blissfully uninformed, on Wed last week, after the markets had closed, the Dubai Govt decided to declare that it wouldn't be backing Dubai World's debts, two weeks before the maturation of the Nakheel sukuk on Dec 14th, equalling up to $5.7bn maturing in May '10. They then went on holiday for Eid.

Global markets went a bit nuts. CDS swaps rocketed from about 300 to 570 points for Dubai, with other GCC countries taking about a 20% increase, and European markets getting hit. The pundits went wild, screaming doom from their media pulpits.

Thursday was supposed to be a peaceful religious festival, but many of us spent it watching various news sources, social media streams and and communications channels increasingly focusing on people predicting the end of Dubai, prounouncing gleefully on how its hubris had brought about the end of the glitzy Emirate.

I'm not good at the technicalities, but the calmer commentators debated the finer points of whether it was a default (the ratings agencies decided it was, and downgraded Dubai Inc companies accordingly), or whether this was a precaution prior to a voluntary default. Then they quickly clarified that there would be a restructure of Dubai World. Then Dubai World quickly clarified that DP World wouldn't be part of any such restructure, effectively ringfencing its crown jewels. But when the local markets opened yesterday DP World's share price dropped nearly 15%. It was fairly low before this kicked off.

Then the Dubai World conference call for investors couldn't go ahead ... because the phone lines were overwhelmed. Really?

Now they say that the Dubai Govt never promised to back Dubai World, that it isn't "part of the government" and never was. They suggest that at no time were these debt instruments touted around as safe as houses, with one of the key messages being "the govt will never let these fail, will never let these companies, part owned by the Dubai Govt, go under." I'd respectfully beg to differ, but I was never directly pitched to, so that is speculation. They are basically inferring that this is a game for grown ups, where each person must basically look out for themselves. I think they're right. I also think they should listen to their own advice.

Here is where Dubai needs to tread really bloody carefully. No, let me rephrase. Here is where Dubai needs to take off the large boots that it has previously used for stomping around and doing whatever it jolly well pleases, and start making amends.

Credibility is gone. There is no credibility. Global markets do not trust Dubai based companies to pay. They don't trust them to deliver. Markets reflect this - it is about 5 times as much to pick up Dubai debt than they are to look at AD or other GCC countries. Yes, that's about oil and resources, to an extent, but it is also about track record. And that is, well, shot to shit, right now.

The sad part, for me, is that there are individuals in the middle of this mess who are seriously smart people. There are comms people in the middle of this who know what it means to communicate well. I know, I've worked with them. But I am willing to wager that the FUD that is so prevalent around the emirate at the moment, is only a thin wispy version of that which is flying around the corridors of power. I'm willing to bet that the answer to all of those mental pundits spraying spittle as they fume and turn red in the face with frustration is... we don't know. There simply isn't an answer.

Yet. Maybe the guy from Deloittes who has been parachuted in to run the restructure will be the saviour and put a sensible plan in place. He has some smart predecessors who didn't manage to fix the chaos, but no-one had quite this much shit to sort through. There may be facts in there, there may be some masterplan, but for the first time in my 8 years in the Emirates, I don't think there is. I think the train has derailed, and I think it's going to take a big readjustment of attitude and patience thresholds, with a healthy dose of intelligence and humilty, to get this place back on track.

Ironically, if Dubai can get back on track, if it can beat this massive hurdle and regain the world's confidence, after a year of scathing, below the belt, "dark side" attacks, and get the respect of the financial community by truly acting with transparency, responsibility (fiscal and moral) and a bit of true Arab aristocratic standing (rather than Bedouin scuffling), it may have actually achieved the real end goal, to become one of the Arab cities that goes down in history as a success, rather than a slightly faded, dusty, derelict, city that once was glorious.