• On The World: Dubai super tower
• Alex Gallafent’s Dubai series (2007)

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This text below is a phonetic transcript of a radio story broadcast by PRI’s THE WORLD. It has been created on deadline by a contractor for PRI. The transcript is included here to facilitate internet searches for audio content. Please report any transcribing errors to theworld@pri.org. This transcript may not be in its final form, and it may be updated. Please be aware that the authoritative record of material distributed by PRI’s THE WORLD is the program audio.

MARCO WERMAN:  It was nice and warm in the city of Dubai today.  The temperature reached 99 degrees, but it’s a dry heat.  And if you can’t take even dry heat, there are ways to escape it, even though the rest of the emirate is mostly desert.  Correspondent Jake Warga tells us about the connection the people of Dubai have with their desert.

JAKE WARGA:  Entering the Burj Dubai Mall, the largest in the world, under now the largest building in the world, is like walking inside a brand new refrigerator, complete with an ice rink.  The only reminder of where I am, in the Middle East, is when the mall music becomes a call to prayer.  So what happened to the desert, or the idea of the desert?  I went to the Sheik Mohammed Center for Cultural Understanding to, well, understand the culture.  This is . . .

FEMALE VOICE 1: I’m – - .

WARGA: She’s an Emirati, a local.

FEMALE VOICE 1: Most people used to live in the desert and they moved inland when development started.

WARGA: The city seems, almost rudely insulated from the desert.  And as the city grew to escape the desert, the desert is now where the people go to escape the city.

FEMALE VOICE 1: Today, it’s just the place that you go to on a weekend maybe, or only during the winter season.  So the desert has turned into a commercial element, especially when it comes to visitors to the country.

WARGA: There are a variety of desert activities on offer.  Most popular is dune bashing.

MUSTAFA:  Dune bashing going ups and downs and sidewards, it’s like a roller coaster ride.

WARGA: Mustafa is with Lama Tours.  We’ve driven out of the city to see the desert, but we’re not the only ones.  I’ve never seen so many ATV’s and land cruisers actually cruising the land.  Okay, it was kind of fun until I vomited.  But I noticed another tourist doing the same.

MUSTAFA:  Once they throw up, the stomach is clean; they are ready to do it again.

WARGa: Sure the desert treats people rough, but people have not treated the desert very well either.  Just beyond where we were dune bashing is Al Maha, one of the top resorts in the world.  It’s also a desert reserve, no dune bashing allowed.

ARNE SILVIS:  Conservation in this country is relatively new.

WARGA: Arne Silvis is the resort’s General Manager.

SILVIS: It’s a foreign concept to most people and we struggle to educate people and to make them aware of the absolute need for conservation.

WARGA: At 225 square kilometers, 4.6% of Dubai’s total land area, Al Maha is the largest reserve in the country and it’s inspiring others.  Al Maha is Oryx in Arabic, named after an animal, a kind of antelope that after four wheel trucks were introduced was hunted to extinction.  The Oryx became the first successful reintroduction of a species into the wild; first in Oman, then here.

GREG SIMPKINS:  The Oryx you can bring back.  Some things you can’t.

WARGA: Greg Simpkins is Al Maha’s Conservation Manager.  We’re standing on the sand surrounded by the sand, but because of conservation efforts, new grass and foliage dots the land.  A hundred years ago this area was tall grass.  It’s man that helped create the desert.  Bringing back the ecological past also helps bring back the cultural past, rediscovering practices that were lost with time.

SIMPKINS: The culture sits with them as a people, and that’s their responsibility and they’re the only ones that can preserve it in its true sense.  We can preserve things about it.  I don’t think it’ll ever go back to how it was; we’re talking 100 years ago, the nomadic lifestyle.  I don’t see that ever happening.

WARGA: Unless the economy seriously tanks, people are not about to exchange cars for camels or townhomes for tents, but certain traditions are being preserved and modernized.  The traditional activity of falconry, for example, almost disappeared in the area along with the birds themselves.  Once a traditional hunting practice, it’s now a revived cultural desert sport.

NEVEL:  This is Kakoo and this is Heretic.

WARGA: Nevel, one of Al Maha’s guides, is balancing Heretic on his arm, demonstrating how they used to hunt with the birds.

NEVEL:  It started in the area about 2,000 years ago with the Bedouin people.

WARGA: Many locals now take great pride in their birds and the history that comes with them, but at modern prices.

NEVEL:  Nowadays falconry is purely a status symbol.  Prices can range from twenty-three thousand dollars to over a quarter of a million dollars for a falcon.

WARGA: Before leaving Dubai, I went to the top of the world’s tallest building, reaching over 2,700 feet away from the desert.  It’s surrounded by artificial lagoons, water displays and completely paved landscape.  I realized that the desert is the past and how they treat it, how they choose to preserve it is, in a way, preserving a culture.  Come sunset, the lights of Dubai look like a giant fallen chandelier and although we were surrounded by it, stood on it, I can no longer see the desert anywhere.  For The World, I’m Jake Warga, Dubai.

Copyright ©2009 PRI’s THE WORLD. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to PRI’s THE WORLD. This transcript may not be reproduced, in whole or in part, without prior written permission. For further information, please email The World’s Permissions Coordinator at theworld@pri.org.

• BBC coverage
• NY Times: “Evidence Mounts for Taliban Role in Car Bomb Plot”
• Profile: Faisal Shahzad

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This text below is a phonetic transcript of a radio story broadcast by PRI’s THE WORLD. It has been created on deadline by a contractor for PRI. The transcript is included here to facilitate internet searches for audio content. Please report any transcribing errors to theworld@pri.org. This transcript may not be in its final form, and it may be updated. Please be aware that the authoritative record of material distributed by PRI’s THE WORLD is the program audio.

MARCO WERMAN:  I’m Marco Werman and this is The World.  The Pentagon today said it was encouraged by Pakistani cooperation in the case of the Times Square Bomb plot.  Authorities in Islamabad are looking into possible connections between Pakistani extremist groups and the suspect in the attack, 30-year-old Faisal Shahzad.  Shahzad is in U.S. custody in New York facing terrorism charges.  He has waived his right to appear before a judge within 48 hours of his arrest and he is said to be cooperating with investigators.  We’ll speak with Pakistan’s ambassador about the case, but first The World’s Matthew Bell has this update.

MATTHEW BELL:  Faisal Shahzad has allegedly admitted that he received terrorist training in Pakistan’s northwest region of Waziristan.  Pakistani officials say they’re investigating possible links between Shahzad and several militant groups, including the Pakistani Taliban.  When that group supposedly claimed responsibility right after Saturday’s Times Square bombing attempt, South Asia expert Marvin Weinbaum says he was very skeptical, but at this point he’s less so.

MARVIN WEINBAUM:  Given what we see right now, it’s pretty clear that he did have connections there.  That he did meet with people who we would describe as Taliban and conceivably other jihadi groups.  What remains to be seen here is whether, in fact, they orchestrated the attack that he undertook in New York City.  That’s another matter.

BELL: Investigators are said to be trying to figure out who might have given Shahzad the money to buy the vehicle and the materials to build the bomb, and then where the cash came from for the plane ticket he bought hours before his arrest.  In Pakistan there were reports today of several suspects being detailed and questioned by authorities.  Marvin Weinbaum, who is with the Middle East Institute in Washington, says the Pakistani government is keen to show that it’s cooperating with the investigation.

WEINBAUM;  What we’re, I think, witnessing in Pakistan now is their reaction, perhaps even their overreaction, the modus operandi for the Pakistanis very often is when in doubt, arrest anyone conceivably involved.  What we’ve seen in the past is a wholesale arrests by a wholesale release of people.

BELL: Perhaps Shahzad received just a bare minimum of terrorist training in Pakistan and then he acted alone.  In any case, Weinbaum says this story could turn out to be a huge embarrassment for Pakistan.

WEINBAUM:  We could very well find that we would trace his training to groups that still enjoy the patronage of the Pakistan government, so it’s a very complicated situation.

BELL: Pakistan’s Interior Minister today said he doubts that Faisal Shahzad was acting alone.  The minister declined to speculate on any possible links to Pakistani militants.  But if there are proven connections between the Times Square plot and Pakistani extremists, South Asia expert Christine Fair of Georgetown University says it wouldn’t be the first case of its kind.  She says so-called home grown radicals with connections overseas are a growing threat.

CHRISTINE FAIR:  My fear is that this is the beginning of something which is going to be more serious and more frequent in the future.

BELL: Fair cites several cases of U.S. terrorist suspects with links to Pakistan.  And she says it’s a sign that American and Pakistani authorities need to start cooperating more closely than ever.   For The World, I’m Matthew Bell.

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• BBC coverage
• Times Square bomb suspect charged
• Profile: Faisal Shahzad

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MARCO WERMAN:  As we mentioned earlier, suspect Faisal Shahzad has reportedly admitted he’s the would-be bomber in the Times Square case.  But officials stress they’re still trying to verify his story.  Meanwhile, another question looms large over the investigation, how was Faisal Shahzad able to board a plane leaving the country when his name was on the government’s no fly list?  Today the U.S. government announced some changes to the way the no fly lists work, but as The World’s Matthew Bell reports, some suggest that’s not enough.

MATTHEW BELL:  New York City Mayor Michael Bloomberg was asked during a news conference yesterday, how could the prime suspect in a major terrorism investigation, whose name had just been added to a no fly list, be allowed to get on a plane headed for Pakistan by way of Dubai?  Bloomberg pointed out that its federal authorities, not New York City Police who manage the government’s no fly lists.

MAYOR MICHAEL BLOOMBERG:  I just don’t want to speculate how that happened.  Clearly, the guy was on the plane and shouldn’t have been.

BELL: In response to what looked like a near escape, Washington tightened its no fly list procedures today.  The airlines are now required to check the names on government no fly lists within two hours of being notified of important changes.  Previously they had 24 hours to make sure that any new names on the government list didn’t match up with names of ticket holders.  For example, Faisal Shahzad’s name was added to the banned list on Monday morning, but later that day he was able to buy a one way ticket, with cash, to South Asia, then go through security and get on the plane.  The system seems to have failed and the changes announced today are aimed at fixing the problem, but that’s not reassuring at all to Michael Greenberger.  He directs the Center for Health and Homeland Security at the University of Maryland.  Greenberger says the failed Christmas Day bombing attempt was also followed by promises to fix the system of passenger screening and it never happened.

MICHAEL GREENBERGER:  We were assured the system was fixed.  This self-evidently demonstrates the system isn’t fixed and its small comfort to the American people that somebody is under surveillance, has now admitted to his guilt in this matter, and could have gotten onto that plane. It’s a sign of a weak and failing system.

BELL: Others see the changes announced today as better than nothing.

JUAN ZARATE:  It’s a helpful change I guess.  But it still is, if the system relies on the airlines themselves to be diligent.

BELL: And that’s a problem, says Juan Karate.  He’s a counter-terrorism expert at the Center for Strategic and International Studies.  Ultimately, he says, the government and not the airlines should have more direct control over checking no fly lists.  But he adds that the problem is deeper than that.

ZARATE: The real vulnerability in a system like this is that you’ve got a system that relies on the identification of individuals via name and assumes that they’re going to be using their name and their proper identification.  You’ve got a problem, though, with people using false documents, false identities.  In those instances, a watch list, a no fly list that’s a name based system is only as good as the integrity of the names.

BELL: The Transportation Security Administration is making changes with a new system called Secure Flight.  Under that program the TSA, and not the airlines, would be responsible for checking names on no fly lists against passenger manifests.  It should be completed by the end of the year, but here’s another problem; despite all the attention on airline security in recent months, there’s still no permanent Director at the TSA.  The position has been vacant since January 2009 thank in part, to political fighting between the Obama administration and Congress.  For The World, I’m Matthew Bell.

Copyright ©2009 PRI’s THE WORLD. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to PRI’s THE WORLD. This transcript may not be reproduced, in whole or in part, without prior written permission. For further information, please email The World’s Permissions Coordinator at theworld@pri.org.

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KATY CLARK:  Freelance journalist Alon Tuval has the misfortune of looking a lot like one of the suspects in the Dubai case.  Alon says even friends are mistaking him for one of those involved.  He’s in Jerusalem now and how have you been mistaken for one of the agents?

ALON TUVAL:  Well I got a call from one of my friends who has a business downtown and he said hey when are you coming to see me?  You are like my hero.  And it was like a bit disconcerting when he said to me look at picture number ten.  So I told him it wasn’t and that I wasn’t in Dubai.  He said listen, it’s your picture, no way around it.  And then I got an SMS from another person I know and then our babysitter stepped into our house and told me that hey, we’re very proud of you.  And I never got on a plane.

CLARK: When you look at the picture do you see the resemblance?

TUVAL: Oh yes.

CLARK: Is it a little freaky?

TUVAL: It’s more than freaky.  I mean, at first I shook it off as you know, it’s a joke, I am a regular Joe.

CLARK: Well I understand you have to go to Jordan on Monday, are you worried?  Are you taking any precautions?

TUVAL: I’m not really worried because I’m going to Jordan for work.  I have to meet a person and it’s only for a couple of hours.  So I’ll be detained, okay, the Jordanians I guess will feed me and then be quite accommodating.  And besides, it could be an interesting adventure.  I carry quite a large sum in life insurance, so my wife would be happy.

CLARK: Well, good luck to you.  Freelance journalist Alon Tuval, thanks for joining us.

TUVAL: My pleasure.  Thank you for having me.

CLARK: So, does Alon Tuval look like one of the agents?  Well, you can judge for yourself.  We’ve got pictures of them both at the world dot org.

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• BBC coverage of this story
• BBC history of Israeli covert killing

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KATY CLARK: I’m Katy Clark and this is The World.  A murder mystery is playing out in the Middle East.  The victim was a military commander of the Palestinian group, Hamas.  Mahmoud al-Mabhouh was killed in Dubai last month. Hamas blamed Israel.  This week, Dubai police released names, photos, and passport numbers of eleven members of an alleged hit squad.  Dubai says they carried European passports, but most of the identities appear to have been stolen.  And, at least seven matched up with Israeli citizens. Ronen Bergman is the security and intelligence correspondent for the Israeli newspaper Yedioth Ahronoth.  He’s on the line with us from Jerusalem.  Mr. Bergman, first of all who was Mahmoud al-Mabhouh and who might have wanted him dead?

RONEN BERGMAN: Mahmoud al-Mabhouh was a senior Hamas field operative.  In as early as 1987 he kidnapped and murdered two Israeli soldiers.  That’s according to his own testimony to Al Jazirah [PH] not long ago.  Then he fled the territories knowing that he’s on the most wanted list.  And, became a field operative for Hamas focusing on the funneling of money and resources from rich communities in the United States and in Europe, rich Muslim communities, to Hamas in Gaza and the West Bank.  Later on, when Hamas became much closer to Iran, he was a king pin in the shipment of arms, sophisticated technology from Tehran to Gaza.  So I don’t know who killed him.  But, I can say that from the point of view of Israel to eliminate such a person is not just a retaliation, but also part of the ongoing secret war between Israel on one hand and what is deemed by Israel as the radical front: Iran, Syria, Hamas and Sistela [PH] on the other.

CLARK: What are Israel officials saying about this incident?

BERGMAN: Israeli officials denied any sort of Israeli involvement in the case, and one former veteran of Mossad, someone called Raffi Atan [PH] said that this is a very sophisticated game trying to frame Israel for being involved in something that it was not.

CLARK: For its part, the British government wants a full investigation into the plot.  It turns out the identity of British citizens might have been stolen by Mahmoud’s killers.  Some Israeli commentators are calling for the head of the Israeli intelligence agency, Mossad, to resign.  So if the killing was indeed carried out by Israeli intelligence, Ronen Bergman, was it a botched operation?

BERGMAN: I would say this. If the person who sent the perpetrators took into account the price that they or the State of Israel, if the State of Israel was behind it, might pay, the price that is an international diplomatic blunder that you just mentioned, or the exposure of the use of stolen identities.  If all this was taken into account, and it was decided that it’s worthwhile doing this in return for a one-way ticket to the sky to the other world to al-Mabhouh [PH] then this is a success.  And al-Mabhouh is killed and the perpetrators are long gone and the Dubai police are chasing the wind.  They will never be able to catch them.

However, if it was not clear how capable and how sophisticated the Dubai police are, then this calls for a very serious examination of the whole thing. And I would say that we are also witnessing the end of an era, the era in which you could perform a traceless assassination is over.  And everything now leaves a mark, an electronic mark or the surveillance camera’s mark.  The footage that was released by the Dubai police is going to be the leading lesson in all intelligence courses around the world.  Because any intelligence agency that would like to perform a noisy operation like an assassination, now would have to reconsider and re-plan and build a whole strategy of new modus operandi.

CLARK: Ronen Bergman is the Security and Intelligence Correspondent for the Israel Newspaper Yedioth Ahronoth.  Thank you very much.

BERGMAN: Thank you very much.

Copyright ©2009 PRI’s THE WORLD. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to PRI’s THE WORLD. This transcript may not be reproduced, in whole or in part, without prior written permission. For further information, please email The World’s Permissions Coordinator at theworld@pri.org.

• BBC coverage
• Burj Khalifa in pictures
• Alex Gallafent on the Dubai crisis (Nov 27)

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JEB SHARP: Bernhard Zand reports for the German weekly Der Spiegel.  His home is in the shadow of the new tower.  He points out that it took a lot of blood, sweat and tears to complete the building.

BERNHARD ZAND: The first thing it took was a huge number of workers, naval workers really from the subcontinent mostly, Pakistan, India, Bangladesh and Sri Lanka.  At the end of the building period the number of workers was 14,000, which was a logistical nightmare to bring all the people in and out at the right time.  They worked for five years 24 hours a day in three shifts and there was only one day that they had to close the building site.  That was during a cyclone over the Indian Ocean.

JEB: And what these workers created this Burj Khalifa is a metal and glass spire with 160 floors, luxury apartments, offices, four swimming pools, a private library, a hotel designed by Giorgio Armani, what does it look like to you from outside and inside?

BERNHARD: We didn’t see very much yet from the inside.  We went up to the observation deck this morning what, actually it surprised me positively was that it is all quite simple.  There is not too much kitsch if you like.  It kind of breathes with the spirit I think of the American architect of the building, Adrian Smith.  This is not as opulent and not as Baroque a building as for example Taipei 101, the tower in Taipei would appear to be or the Patronis tower in Kuala Lumpur.  It’s actually a very simple and needle-like clear structure and it looks particularly nice at dusk and dawn when it reflects the sunlight in a very unique way.

JEB: It’s so striking that this building sort of gleaming up out of the sands comes at this time of financial crisis.  How are people viewing it and what’s going to become of the spaces inside it?  Are they rented and sold?

BERNHARD: I think in general the people of Dubai and of course the leadership of Imar, the company behind the Burge, are quite happy to be able to open the building right now and to have this big ceremony.  It is just basically good news.  As I understand most of the hotel floors are occupied by this Giorgio Armani hotel anyway, and the residential floors above that seem to be mostly sold.  I would be skeptic as far as the occupancy of the as they call it, corporate suites will look like.  Obviously Dubai has been to much too much office space, it is said to have as much office space as the city of Shanghai, which has about ten times the population of Dubai.  So I would be very surprised if they really could occupy the office floors on top of the tower any time soon.

JEB: And yet you suggested it’s seen as something positive and not as kind of arrogant over reach.

BERNHARD: Not at all.  I think one of the main motifs and the main driving forces to build this tower has not only been to show to the world what Dubai can do, but also to show what the Arabs can do.  There is a very strong element of pride in it.  I think this is one of the main headlines today is the tower of pride.  It was a very joyful opening ceremony and there is no negativity whatsoever about it.

JEB: And you were lucky enough to be at the ceremony this evening.  Just give us a bit more flavor of what it was like.

BERNHARD: I have to say it was really impressive.  The audience was seated quite close to the tower and immediately under it so the fireworks that went off really went off literally above us and there were lots of ahs and ohs.  I for myself hadn’t seen a firework of this dimension before.

JEB: Well thank you.  Bernhard Zend writes for the German weekly Der Spiegel.  Thanks for talking to us about it.

BERNHARD: My pleasure.

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The Global Economy Podcast was recently voted one of iTunes top podcasts for 2009! Quite an honor. Thank you, good folks at iTunes. Also on the esteemed list: President Obama’s Weekly Radio Address, 60 Minutes, and Old Jews Telling Jokes. While I’m not sure of the criteria used in the voting, we at The World are very happy to receive the recognition.

Some of the stories on this edition of the podcast… A story of love, or rather, a story about the economics of love. During tough times, people need entertainment, a distraction, a daydream. One industry that seems to be doing rather well, throughout the globe, is romance fiction.

We’ll also hear a story about Islamic financing, a piece about the green economy in India, and an interesting new marketing campaign from Chrysler featuring Burma’s pro-democracy movement Aung San Suu Kyi.

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This text below is a phonetic transcript of a radio story broadcast by PRI’s THE WORLD. It has been created on deadline by a contractor for PRI. The transcript is included here to facilitate internet searches for audio content. Please report any transcribing errors to theworld@pri.org. This transcript may not be in its final form, and it may be updated. Please be aware that the authoritative record of material distributed by PRI’s THE WORLD is the program audio.

MARCO WERMAN: Around the Middle East, Islamic financiers stood by and watched as the Western financial system imploded last year.  They thought that what’s known as Sharia-compliant investing would keep their money safe.  Then came word last week of the collapse of Dubai World.   It revealed that some Islamic financing wasn’t quite as safe as it was cracked up to be.  The World’s Aaron Schachter reports.

AARON SCHACHTER: Put simply, Sharia-compliant financing is any kind of monetary transaction in accordance with the laws of the Koran.  The most basic of those laws forbids people to buy, sell or invest in products that are haram, forbidden like alcohol, gambling or pornography.  But the biggest financial sin in Islam is usury, or  charging interest.  So Islamic financiers had to come up with something else.  John Foster is former editor of Islamic Banking and Finance magazine.

JOHN FOSTER: And so, instead of just giving money to somebody, okay, to go away and then charging interest, what Islamic finance tries to do is, it tries to go into joint ventures with people. So the risk is shared between the person who is borrowing the money and the person who is providing the capital, and they both share in the profit.  Today it’s called private equity, or even venture capital.

SCHACHTER: To ensure that financial transactions or products are halal, the Muslim equivalent of kosher, financial institutions hire religious authorities to review and approve each product.  One of those authorities is Sheikh Zaher Nsouli, with the Lebanese Islamic Bank in Beirut.  Nsouli says sharing risk is intended keep financiers honest.  He says Islamic finance isn’t against making money, on the contrary.  But it is against taking risk with someone else’s money.

SHEIKH ZAHER NSOULI: You’ll not invest in anything except if you know the business risk is good, it’s healthy for the economy, it’s [INDISCERNIBLE].  You’re much more involved in the real economy.

SCHACHTER: Nsouli says Islamic banks have on average outperformed conventional ones   because when people deposit money, they’re buying shares of real projects that are Sharia-compliant.   But Islamic financing as a whole isn’t immune from Western troubles.

MOHAMMED SAID RAHMAN: If you put a chimpanzee behind a Rolls Royce, is Rolls Royce still a good car or is chimpanzee still a bad driver?

SCHACHTER: Mohammed Said Rahman is Chairman of the Institute of Halal Investing, based in Portland, Oregon.  He says in Dubai, greed got the better of  some  Islamic  financial institutions,  the chimpanzees .

RAHMAN: So what happened is that the chimpanzees that were loaning the money out to the people, their eyes were focused towards quick flip over of profits.  So Dubai was a casino.

SCHACHTER: The problem was something called a “sukuk,”  or an Islamic bond.   In theory, a sukuk should equal the cost of a project, so assets equal liability.   But in Dubai, that wasn’t the case.  They was just as much speculation there as anywhere else.  But John Foster, formerly of Islamic Banking and Finance Magazine, says the Islamic finance industry has lost its way.

FOSTER: What a lot of the modern Islamic banks have done is they’ve tried to recreate conventional finance, except with an Islamic wrapper.  So a lot of the banks would find a sheikh for hire.  But the problem which Islamic finance has got at the moment, it needs to have a good look at itself; it needs to address where it is and what it’s trying to achieve.  It shouldn’t try to be Wall Street, it should be Main Street, and it should be for the good for the whole of humanity.

SCHACHTER: Islamic banker Zaher Nsouli says that’s why the crisis in Dubai may actually be a good thing, at least for Islamic financing.

NSOULI: Dubai World’s crisis will lead to a shift in the way of structuring the sukuk, the way of imitating conventional models.   You need corrections from time to time.

SCHACHTER: Nsouli and others says modern Islamic finance is in its infancy.  Give it a few years to catch on, and for the mainstream to realize that  their form of ethical finance is not just something for the world’s billion Muslims.  For The World, I’m Aaron Schachter, Beirut.

Copyright ©2009 PRI’s THE WORLD. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to PRI’s THE WORLD. This transcript may not be reproduced, in whole or in part, without prior written permission. For further information, please email The World’s Permissions Coordinator at theworld@pri.org.

• BBC coverage
• Global Economy podcast
• Alex Gallafent on the Dubai crisis

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MARCO WERMAN: I’m Marco Werman, and this is The World, a co-production of the BBC World Service, PRI and WGBH Boston.  The Persian Gulf emirate of Dubai today tried to reassure investors about the health of its finances, but investors didn’t buy it.  Stock markets in both Dubai and neighboring Abu Dhabi fell sharply today.  The problem, as investors see it, is Dubai World.  That’s the main investment arm of the government of Dubai.  It’s having trouble repaying billions of dollars of debt, and the emirate’s government has announced that it won’t guarantee repayment of that debt, which, no surprise, makes investors nervous.  The World’s Jason Margolis explains the global implications of this Dubai mess.

JASON MARGOLIS: In terms of major world companies, Dubai World isn’t that big a deal.  When General Motors filed for bankruptcy this year, GM’s debt was nearly three times larger than Dubai World’s.   But Dubai World is different from GM.  The emirate of Dubai owns Dubai World.  So, if Dubai World, or by extension, the emirate of Dubai, can’t meet its debt obligations, that spells wider troubles, says Christopher Davidson, a Dubai credit expert from Durham University.

CHRISTOPHER DAVIDSON: Dubai’s disaster, as it unfolds, is certainly tarnishing the rest of the region.  The rest of the region by reputation will find it difficult to refinance debt too because the cost of insuring that debt increases drastically.

MARGOLIS: Davidson says banks might also think twice before loaning money to emerging economies in other parts of the world.

DAVIDSON: Dubai has tarnished the reputations of emerging markets around the world, especially Asia.

MARGOLIS: Not that there’s anything new happening in Asian markets. In fact, Dubai’s excess could also potentially tarnish other nations that have even less to do with the emirate.

DESMOND LACHMAN: A bunch of countries like Latvia, Lithuania, Estonia, together with Ukraine, and Bulgaria, and Hungary.

MARGOLIS: That’s economist Desmond Lachman at the American Enterprise Institute in Washington.  And Lachman says it’s not only emerging economies that might have trouble getting access to credit.

LACHMAN: If Dubai is reminding people there’s a lot of risk outstanding and if people begin to become a lot more risk averse, lenders become wary about lending to a country that has got very large imbalances.

MARGOLIS: Lachman says some western European countries like Greece, Ireland, Spain and Portugal could have trouble getting loans at reasonable rates.  The problems in Dubai pose another kind of risk to the world economy, to the world’s stock markets.  Banks in the United Kingdom are the most exposed with an estimated $50 billion in outstanding loans to the United Arab Emirates.  American, French, and German banks are all on the hook for about $10 billion each.  These loans sent investors scrambling this week, dumping shares, guessing which western banks are most exposed to risk.  Right now, and this might be sounding familiar, nobody is certain which banks are holding which bad loans.   But maybe it’s not all that bad. Of course, markets often overreact.

DOUG REDIKER: There’s the reality, then there’s the perception of the reality.

MARGOLIS: Doug Rediker is a former investment banker and is now with the Washington think tank the New America Foundation.

REDIKER: The reality there’s a problem in Dubai, there’s a problem in a specific area of Dubai.  Not area geographically, I mean Dubai World and Dubai World’s holdings, but that doesn’t necessarily mean that there are problems throughout emerging markets or throughout the Gulf.

MARGOLIS: But then there’s the perception of the reality.

REDIKER: From a snapshot of a trading floor mentality, if you see “Dubai Crisis” on your screen, you could, without having a greater understanding of the nuance, assume that this a broader crisis, sell your positions in a panic and as result trigger something that really isn’t warranted.

MARGOLIS: Warranted or not, that’s what we saw investors do last week. Whether their perception of reality changes this week, that’s another story.  For the World, I’m Jason Margolis

Copyright ©2009 PRI’s THE WORLD. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to PRI’s THE WORLD. This transcript may not be reproduced, in whole or in part, without prior written permission. For further information, please email The World’s Permissions Coordinator at theworld@pri.org.

• BBC coverage
• Global Economy podcast
• The World’s Alex Gallafent reported from Dubai in 2007

Read the Transcript
This text below is a phonetic transcript of a radio story broadcast by PRI’s THE WORLD. It has been created on deadline by a contractor for PRI. The transcript is included here to facilitate internet searches for audio content. Please report any transcribing errors to theworld@pri.org. This transcript may not be in its final form, and it may be updated. Please be aware that the authoritative record of material distributed by PRI’s THE WORLD is the program audio.

MARCO WERMAN: I’m Marco Werman.  This is The World.  Shoppers are turning out in strong numbers today for the start of the holiday season, but cloudy economic skies hover over this Black Friday.  Unemployment is high, credit is tight, and most investors have less money today than they did yesterday. The Dow Jones industrial average dropped 154 points to close at 10,310.  Wall Street may have been reacting to financial trouble in Dubai.  That’s the semi-autonomous city-state that’s part of the United Arab Emirates.  The World’s Alex Gallafent begins our coverage.

ALEX GALLAFENT: You may have heard about some of the things that made Dubai famous as a kind of Disneyland for grown-ups.  The indoor ski dome in the middle of a desert, the tallest tower in the world, the biggest man-made islands.  These were all part of a program of colossal spending in Dubai, but it wasn’t paid for with oil money.  Dubai’s wells are dry.  Matthew Martin is editor of the Middle East Economic Digest.

MATTHEW MARTIN: A lot of the massive growth that we’ve seen in Dubai over the past few years has all been fueled not directly off the government balance sheet but by taking on debt from the capital markets.

GALLAFENT: The company at the center of the current crisis is facing the consequences of that approach.  That company is Dubai World.  It’s a real estate group backed by Dubai’s government, and it’s one of the prime movers in the city-state’s explosive growth.  But Dubai World has racked up almost 60 billion dollars worth of debt.  This week the company asked creditors if it could postpone repayments on that debt for six months.  Christopher Davidson is the author of Dubai: The Vulnerability of Success. He says Dubai World’s troubles are the result of a broader economic strategy in the emirate.

CHRISTOPHER DAVIDSON: What we’ve seen in Dubai is trying to build an economy that’s been aimed at bringing in foreign direct investment to keep it in a desert creating a sponge like economy to bring in wealth from the region, from Britain, America, anywhere that wants to invest in real estate.  And this really has been tinkering with Dubai’s historical success as a port economy, a place where money passes through and goes somewhere else. But really, the last few years has seen a shift in the focus of the economy, and that’s really what’s been its undoing.

GALLAFENT: The global economic crisis exposed Dubai’s flawed business model. Real estate prices plummeted after years of flying ever higher.  Foreign investment slowed down.  Mahmood Nadi is a Jordanian mechanical engineer who has worked in Dubai for two years.  He says you can see the emirate’s problems in its glittering collection of high-rise buildings.

MAHMOOD NADI: Almost fifty percent not finished yet, thirty percent still not occupied.  You can say twenty percent are occupied, from the new high-rise buildings. The situation is really not stable.

GALLAFENT: Indeed, Dubai has a skyline bought on credit, and Christopher Davidson thinks creditors are unlikely to accept Dubai World’s request to postpone its debt repayments.

DAVIDSON: For the last several months, there have been a number of international companies that have been owed sums for labor and construction work they’ve conducted in Dubai.  They’ve been rather quiet and polite about that hoping the good times will return, but I think now we’ll get to the stage where lawsuits will be pressed on the government of Dubai.

GALLAFENT: Dubai will probably look to its neighbor for help.  That’s Abu Dhabi, another part of the United Arab Emirates.  Unlike Dubai, Abu Dhabi does have oil.  In February, it bought 10 billion dollars worth of bonds from Dubai.  Many saw that deal as a bailout, but it’s not clear when or at what price Abu Dhabi would come to its neighbor’s rescue again. That uncertainty propelled today’s market worries. Another concern of investors is the lack of detail about how Dubai’s proposed debt rescheduling would work.  But British Prime Minister Gordon Brown predicted today that Dubai’s problems will not set off a second global economic meltdown.

GORDON BROWN: If this is a localized problem, then it can be dealt with, and I believe that that is the case. And I believe that this is one of things that we will see over the next few months as the world economy returns to growth, but it is an event that can be dealt with.

GALLAFENT: That’s a hope investors in the United States most likely share.  For The World, I’m Alex Gallafent.

Copyright ©2009 PRI’s THE WORLD. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to PRI’s THE WORLD. This transcript may not be reproduced, in whole or in part, without prior written permission. For further information, please email The World’s Permissions Coordinator at theworld@pri.org.