AS YOU may have heard, Dubai's largest company - Dubai World - said it would postpone repaying its debts until at least the end of May.

TEXT/GRAPHICS: LARRY HAVERKAMP AND MAROO

It's the 'at least' part that got lenders worried. It affects US$26 billion ($36b) of mostly real estate loans and reminds everyone of the $1 trillion in defaults that nearly sank world economies.

Are we headed down that road again?

Dubai has 1.5 million residents, of which 90 per cent are foreigners. It has little oil. It is built mostly on borrowed money and has followed the vision of His Royal Highness Sheikh Mohammed Bin Rashid Al-Maktoum.

Dubai is a sculpture of glass and steel in the middle of the desert. It's beautiful. It's grand. It may also be over-done.

Does the world really need a ski resort with snow and freezing temperatures in the middle of the desert? Need it or not, Dubai has that and more.

Its most recent 'first' is the US$4b Burj Dubai, the new tallest building in the world.

Its opening next month is likely to be a low-key affair. The concern is that the debt default makes it look like the world's tallest folly.

Occupancy is probably low although no one really knows. It is one of Dubai's many unpublished statistics.

Grander still is the upcoming 1km tall Nakheel Tower. It is part of a US$38b development which - thankfully - has been put on hold for at least a year.

Basic questions like 'Who owns the place?' are not easy to answer. Most assets are owned by Dubai World, which is owned by Dubai citizens. Maybe.

It might also be the property of Sheikh Mohammed. Ask anyone in Dubai about this and you get answers like, 'I don't know and I don't care.'

It's the same when discussing the Sheikh's love of horse racing. His Royal Highness owns 4,000 prized horses in England plus more in Ireland, Australia and the US.

It's not a cheap sport. A joke is that the only thing going faster than the horses is the money poured into them.

What if the horse money had gone towards paying Dubai World's debts? Could default have been avoided? Questions like that don't get answered in the Emirate of Dubai. Indeed, they don't even get asked.

Timeline to disaster

THE default on Dubai's debt came as a surprise. Should it have been anticipated? Here is the timeline. You decide.

12 Oct: The rating agency Standard and Poor's (S&P) estimates that Dubai World cannot generate enough cash to repay its debts. There is little concern since it is assumed the government guarantees them.

15 Oct: S&P confirms there is 'significant' likelihood that Dubai would help government-related entities - like Dubai World - meet its debt obligations.

It is also assumed that Dubai's rich sister Emirate, Abu Dhabi, would come to the rescue if needed.

9 Nov: A news reporter asks if Abu Dhabi's support is solid. It prompts a testy reply from Sheikh Mohammed who says anyone doubting the unity of Dubai and Abu Dhabi should just 'shut up'.

That does the trick. Everyone shuts up.

Over October and November, Dubai gets US$15billion ($20b) in loans from Abu Dhabi, but it needs another US$5b to cover debt payments due in mid-December. Abu Dhabi decides to pass on the top-up.

11 Nov: Sheikh Mohammed says Dubai World will have no trouble repaying its debts and all projects are moving forward on schedule.

25 Nov: Dubai drops its bombshell and says creditors won't get their money until 'at least' the end of May.

30 Nov: The Dubai government reiterates that it does not guarantee the debts of the companies it owns.

Last week: Rating agencies downgraded most Dubai debt to 'junk' status.

Dubai now risks becoming a ghost town if labour and capital flee. About 90 per cent of its population are foreigners.

It didn't have to end like this. Dubai could have issued another $5b of sovereign debt and quietly repaid Dubai World's debts.

Alternatively, it could have issued shares in Dubai World to repay its debts. That would have made the company government-linked, requiring transparent audits, following a Singapore model. It is not clear why it chose the more painful route that it did.

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