Dubai Fiasco Stresses Need to Grow Within Means

For some time, Dubai has been the role model of the most creative entrepreneurship among government officials and business executives here. Particularly so for President Lee Myung-bak, who used to tell people to ``learn from Dubai.''

It may be too early to tell, but much ― if not most ― of what the tiny Islamic emirate has built on the desert, or stood for symbolically, is in danger of ending up as such; a house built on sand.

Fortunately, the Korean financial firms' exposure to the Middle East state is reportedly not very big, and its builders' projects are being focused in the neighboring, and far more stable, emirate of Abu Dhabi. It is good businesspeople have known far better than government officials and news people about what's actually happening abroad.

Despite the initial stock market fall across the globe, the rest of the world will also likely emerge largely unscathed from the ``Dubai shock,'' in which the emirate's investment arm, Dubai World, announced a virtual moratorium on its debt of about $56 billion, or 70 percent of the kingdom's total external liabilities of $80 billion, for at least six months.

Few can say, however, how long and far its adverse effects will reach, especially if the financial turmoil affects the Middle East debt market and ripples through the most vulnerable parts of the world, including some East European countries, as well as their debt-stricken Western counterparts, such as Ireland and Iceland, before finally landing in the emerging economies of Asia, including Korea. The local bourse's nearly 5-percent plunge on Friday only reaffirmed the nation's vulnerability to external shocks, sometimes even beyond any reasonable extent.

The latest financial incident also shows how fragile the seeming global economic recovery is and how many landmines there are on the long path to finally escape from the Great Recession. The U.S. dollar's continuous slide and the Japanese government's declaration of deflation for the first time in eight years are just a few of them.

If more than a few Koreans find the financial turmoil halfway across the globe not so far away, that may be because of the coincidental similarity between Dubai and Korea; namely, the massive ― almost obsessive ― construction projects beyond their fiscal ability.

Like Dubai, all of Korea is now a huge construction site, with its project to refurbish the country's four largest rivers, numerous housing projects in the capital city and its satellite towns, the Seoul Metropolitan Government's ``Han River Renaissance Project,'' as well as its plan to turn the capital into a hub of aquatic tourism in Northeast Asia.

The Middle East emirate's dream has been bent on construction like there is no tomorrow, and now there seems little hope that its economy will recover, at least within five years. It should be a loud wakeup call for the Korean policymakers and builders gripped by similarly symbiotic mirage.