From Vision™ to nightmare

It was October 2003; the setting was the recently opened Madinat Jumeirah, its lobby strewn with even more rose-petals and incense-bearers than usual. For the weary Dubai hack pack, lured there by the anticipation of free Jumeirah International catering and yet another laser-etched paperweight or pleather business folder, it was clear that Sheikhliness was afoot.

Sharpened pencils and reporters' notebooks were readied as the crowds descended the elevator into the press conference room. It was packed to the rafters. As well as journalists there were endless VIP guests, businesspeople and white-robed members of the royal retinue.

This was an era of great works of Vision™ - from Dubai Internet City and Media City to Dubai International Financial Centre. The emirate was growing, it was the start of the boom. People were excited about Dubai, they were anticipating great things. So far everything made sense. The direction was clear. Trade, commerce, technology: all areas that Dubai already did or likely could excel at.

And then a lengthy video played, introducing Dubailand. Endless CGI scenes of housing developments were intercut with stock footage of theme parks and shots of Dubai. It was more bewildering than impressive. As it went on, it made progressively less sense. The accompanying speech was no more enlightening.

As the media shuffled out, and started swapping notes, one thing became clear. Everyone had been left with a strange, prevailing sensation of tackiness. (According to one source in a production company that didn't win the bid, the video was made on the cheap in Asia). Nonetheless, this was an era when everyone believed in Dubai, and when everyone - local or expat - wanted to believe in Dubai.

But no one understood Dubailand. Other than that it appeared to be connected to tourism, it didn't seem very well defined. And its history has been one of cancellations, cover-ups, shifting goalposts. There was this article by ITP (link goes to archived pdf): "Projects worth billions of dollars have been shelved on the massive Dubailand development" - it was hastily pulled from the web, despite containing quotes from a senior official. Its assertions were never corrected or denied. As one source says in the banned article: "Many [projects] were unfeasible and impractical - the numbers just didn’t work, and they were simply shrouded by the glitz of the idea."

Looking back, Dubailand is perhaps the defining moment when the Vision™ first faltered. Let us not forget what we were told that day, these are the words of His Highness Sheikh Mohammed bin Rashid Al Maktoum:

"I would like to tell capitalists that Dubai does not need investors, investors need Dubai and I tell you that the risk lies not in using your money but in letting it pile up. It is dormant and dead if it is merely a figure in an account. I tell them not to hold onto it and kill it in safes, let it breathe and be active because money is like water - if you lock it up, it becomes stagnant and foul-smelling, but if you let it flow, it stays fresh. If it does not flow, it will become stagnant and its colour will change. When I encourage you to invest, I am not asking you to put your money into a fire - I guarantee that your money will be invested in carefully studied projects. I want to be frank with you - I have the courage to take decisions and to bear the responsibility for the consequences. Do you have the courage to be frank and decisive?"


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Bubbles in the sand

I'm forever blowing bubbles
Property bubbles in the sand
They grow so fast, obviously can't last
But why do I care, I still own the land
People keep on buying
I take all their cash
Oh, I'm forever blowing bubbles
And bubbles always crash

"Nowadays, ten months after the financial crisis came crashing in on the United Arab Emirates (UAE), nearly destroying its shiniest component, Dubai, hundreds of cranes and dredgers have yet to resume work. The Queen Elizabeth II, once the world’s smartest liner, due to become yet another posh Dubai hotel, is a sleeping quayside hulk. Nothing is happening on three of the most recently man-made islands shaped like palm trees off Dubai’s coast that were the latest flashy projects of Nakheel, the emirate’s shaky real-estate developer."


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Dubai: boom to bust?

"You don't have to be Einstein to work out that things are slowing down."

Not the words of an Embittered Expat™ retrenched from his tax-free job in one of Dubai's endless "Cities", nor a disgruntled journalist having a whinge over an overpriced pint of frothy haram-juice in the Radisson's Media Bar, but a quote from the CEO of one of the world's biggest construction companies operating in Dubai:

"There are undoubtedly issues in Dubai."

The latest word has it that Abu Dhabi has already bailed Dubai out. Dubai allegedly made the desperate (or cunning?) move of courting Saudi and Iranian funds, and fearing increased Iranian influence, Big Dhabi stepped in.

Despite that, the official line is that Dubai still has US$80 billion worth of debt, and no one knows exactly what needs refinancing when:

"The Dubai government has announced it has debts totalling $80bn, but has yet to release a detailed outline of its servicing requirements or the ability of its assets to generate cash flow.

"Borse Dubai is seeking to refinance a $3.8bn loan which matures this week, but officials say the government-owned group is finding it hard to secure the financing it needs from foreign banks, in spite of strong initial interest."

Meanwhile Dubai Holdings is restructuring and consolidating to cut costs, while local newspapers blame the international economy rather than any wobble in the sheikhly Vision™ :

“Dubai will be the fastest city to recover from the impact of the ongoing credit crunch, and the emirate’s real estate sector will once again witness a period of long term boom."

But when international newspapers are printing "lurid rumours" that the Palm Jumeira is sinking and only cockroaches come of out of the hotel taps, the confidence needed to restore Dubai's boom times may be a very long way away.


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Etihad to take over Emirates?

According to The Times, Abu Dhabi is demanding control of Emirates in return for a multi billion dollar bailout:

"The emirate, which is ruled by the Al Maktoum family, has been hit hard by the credit crunch. Its property market, in which many of the big players are state-owned or backed, has enjoyed explosive growth over the last decade but prices are now tumbling, leaving heavily indebted developers badly exposed.

"Government sources in Dubai confirmed last week that talks had begun with Abu Dhabi, which has huge oil and gas reserves, about funding. Rather than ploughing cash into the Dubai state, Abu Dhabi has offered to invest in its neighbour’s strategic assets.

"The airline alone is estimated to be worth about £10 billion and selling a stake in it could generate enough cash to prop up much of Dubai’s economy."

Etihad already bills itself as "the national airline of the UAE". A national airline that doesn't, admittedly, actually fly to the biggest, busiest, most famous city in the UAE if not the entire Gulf. But it soon will if Sheikh Ahmed and his aircraft end up as the sacrificial virgins for Dubai's Big Bubble Burst.

Both airlines deny any merger plans. But given the rapid consolidation taking place in the rest of the aviation industry, having two of the world's fastest growing airlines based in the same tiny country makes increasingly less sense. Certainly plenty of pilots think a closer relationship is on the cards.

Dubai property bubble bursting

"Welcome to Dubai Aromatic City: enjoy an exclusive lifestyle by the azure-brown waters of the Arabian Gulf, or take a dip in your villa's private cess-pool as you watch the rich rivers of effluent run down to the sea,"

Dubai is in the shit in more ways than one. Raw sewage flowing onto tourist beaches is foul enough, but fouler still would be a property sector meltdown:

Then, over the summer, Morgan Stanley issued a note which said that Dubai property prices would fall by 10% by 2010. Quite simply, there may not be enough demand for the wave of new property coming onto the market. To a society used to easy returns, this was a shock.

It's not actually a shock to anyone who bothered to do a few sums on a pocket calculator, as Matein Khalid did back in 2005. He predicted a glut by 2008, which a later report by EFG Hermes also indicated.

Moody's is also bearish: it believes that Dubai may have to borrow from Abu Dhabi or the federal UAE government (which is basically the same entity). The cost of insuring Dubai Holding's bonds have quadrupled since May.

Even Gulf News reports gloomy tidings from Colliers International and from Citi:

"In our view, there is legitimate concern the Dubai market is enduring a liquidity squeeze, witnessing macro-economic and credit deterioration in most of the countries from where its expat buyers hail, maturing from a regulatory perspective and seeing the beginnings of a shakeout of small developers," said an analyst in yesterday's Citi Research real estate report.

No wonder that 75% of Arabian Business readers wouldn't touch Gulf real estate with someone else's bargepole.


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iPhone iMoan

Unsurprisingly, since it didn't get the first model nor is there even an official Apple presence here, the UAE is not getting the 3G iPhone. More surprisingly, in fact absolutely absurd to the point of wanting to gouge ones own brain out with a rusty spork after reading it, is the TRA's claim that it is rejecting the iPhone, rather than Steve Jobs not giving the first toss about them (or probably even knowing the UAE exists):

Dubai: The iPhone will not see an official UAE launch as long as it wants to be made available through one telecom operator exclusively, an official at the Telecoms Regulatory Authority has said.

An exclusivity contract for the iPhone that etisalat was seeking has been rejected by the TRA, Gulf News has learned.

The spokesperson for the TRA, Rasheed Joumblatt, refused to confirm this but warned that all exclusivity contracts will be rejected "regardless of which operator applies".

Yes, it's the admirable Rasheed Joumblatt, that melodious mouthpiece-of-Al Ghanem who was educated at the American University but just can't get his head around the concept of freedom of speech. Or simple facts. Or the truth. A reality check for Mr Joumblatt:

1. Apple is not insisting on single operator exclusivity contracts. In many counties it is offered through multiple operators.

2. The UAE had one of the worst monopoly telco sectors in the world. It now has a duopoly so monopolistic in nature that it may as well be a conjoined twin. Both du and etishite are owned and misrun by the Federal government.

But hey, at least one person is thrilled by Mr Joumblatt's valiant stance - Aboud from Abu Dhabi: "Bravo UAE for not agreeing to Apple's terms."


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Parlez-vous Arabic?

Dubai@Random explains why a good working knowledge of Arabic - or at least an honest and reliable translator - can be vital for doing business in the sandlands:

"Farook asked me to join him for coffee to look over the English of a contract he'd drawn up. He wanted to be sure that the English was OK. In a way, this makes Farook more honest than a lot of people I've met in Dubai, who prepare a contract with a quite reasonable English version and a quite unreasonable Arabic version, and rely on the fact that, in a UAE court, the English has absolutely no standing.

"I should mention that, in the West, if the contract were in English and Arabic, and an Arab who'd been cheated showed that the Arabic was completely different from the English, the court might declare the contract null and void. Or it might not, deciding that English is the language of the land. But here, under the law, if the English and Arabic are completely different, it doesn't matter, only the Arabic counts."

Farook is an absolutely fascinating character, it is well worth going through D@R's archives to read more of his adventures.


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