IT IS relatively easy to snigger at the plight facing Dubai. Words like hubris and phrases like pride comes before a fall come to mind. After all, it is pretty humiliating for anyone to admit they can't pay their bills, let alone a city which has built its reputation upon being a braggart.

There is a feeling that they had this coming to them. The doom-mongers all shake their heads sagely, as if to acknowledge that they always knew this would come to grief. None of which is either helpful, or in fact deals with the whole story.

A look back at Dubai's history shows that it would be very unwise to allow the spirit of schadenfreude to go to far. Dubai has been a master at reinventing itself to adapt to, and take advantage of, situations as and when they present themselves.

For instance, the collapse of the pearl industry during the Great Depression hit Dubai hard. The then ruler, Sheikh Rashid, realised the emirate had to reinvent itself. The sheikh transformed the area by turning it into a duty-free port: importing and re-exporting became the new lifeblood of Dubai.

It was a business that would sustain Dubai until oil wealth arrived in the 1960s and Dubai joined forces with Abu Dhabi and others, to form the United Arab Emirates. While there was oil money aplenty, Dubai itself was far from blessed with crude.

Life after oil

The bulk of the oil is owned by the wealthier partner, Abu Dhabi, which has 95% of the country's reserves. It is Abu Dhabi that pumps most of the 2.25 million barrels of daily production. Dubai's contribution, estimated at around 200 000-bbd, is barely 10% of the total. Worse, Dubai's reserves are thought to be dwindling fast and may well run out within 20 years.

So, continuing a tradition started by Sheikh Rashid and followed by Sheikhs Maktoum and now Mohammed, Dubai has been in a constant search for "what next". Its helter-skelter rush to build a variety of industries - including financial services, tourism and of course a world class airline, Emirates - has all been geared to finding a role for life after oil.

Unfortunately, as the loans poured in, common sense leaked out as ambition and desire took over. Jaw-dropping infrastructure projects such as the man-made Palm Islands and the tallest building in the world, along with indoor ski runs and vast shopping malls, have left people wondering what, how and why.

Dire need for a dose of reality

With up to 90% of the population imported to build and run these projects, there was little purpose to Dubai's growth other than to promote Dubai's growth.

Just as the dot.com companies tried and failed to convince us the accounting rules had been rewritten with Ebitda and "Path to profitability", so Dubai also tried to change the rules, adopting its own "field of dreams" through its policy of if we build it, they will come.

Now, Dubai needs forensically to reappraise what works and what doesn't. Decisions need to be based on back-to-basics, with an eye on the long-term viability of Dubai - not the short-term wow of fashion and fad.

For instance, Emirates carries nearly 30 million passengers and is a roaring success - but does it really need to buy 57 A380 superjumbos at a time of declining capacity? It will be many years before any airline can profitably run such a number of large planes.

For nearly a century Dubai has proved, when faced with economic adversity bordering on disaster, it can make decisions which in hindsight were prophetic. Backed by the huge resources of Abu Dhabi and its oil wealth, the emirate can do so again. But only if it is prepared to have a dose of reality that recognises a lot of what has been done made little sense.

When things go wrong, there may plenty of people who say "I told you so". Dubai's mission now is to clear up the wreckage, show that it is running the marathon race not the short sprint, and prove them wrong.

- Fin24.com

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