Dubai, buy, buy: Gulf state starts to build again
Three years after its debt crisis and bailout, has the emirate lost touch with reality by bankrolling another boom?
A four-wheel-drive vehicle encrusted with silver and gold coins glints in the winter sun at a national day parade in Dubai. This is not a city with any qualms about appearing ostentatious. However, after its humbling debt crisis and subsequent bailout by the federal government, the emirate – one of seven that make up the United Arab Emirates – has been forced to rein in some of its natural extravagance over the past three years.
But now the headline-grabbing mega-projects that defined its boom years are back. In the past fortnight, the emirate has unveiled an array of grand development plans, including a new "city" which will rise from the sands just outside central Dubai and contain 100 new hotels and green space a third bigger than London's Hyde Park.
Breaking records is a favourite pastime for Dubai. The emirate is already home to the world's tallest building –the 829.8m (2,722ft) Burj Khalifa – which dwarfs the dozens of gleaming towers that would, in any other city, be a dizzying skyline on their own. In the Burj Khalifa's shadow sits Dubai Mall, the world's biggest by area, where after browsing designer shops, visitors can go scuba diving in a shark tank.
The new city, to be named after the emirate's ruler, Sheikh Mohammed bin Rashid al-Maktoum, will include the even larger Mall of the World, with the capacity to welcome 80 million shoppers a year. Attached to it will be a Universal Studios branded "entertainment centre".
The mammoth project, which will also contain art galleries and a golf course, was announced by Sheikh Mohammed with typical bombast. "The future does not wait for those who are hesitant. We do not anticipate the future. We build it," he declared.
Just days later came the news that a £1.7bn plan for five new theme parks had also been approved. A Bollywood park offering live theatre shows will cater to affluent Indian visitors. While in town they will also be able to visit a replica of their beloved Taj Mahal, four times the size of the original, which will contain a five-star hotel. A Hollywood adventure park, children's park, night safari and marine park are also planned.
Timed neatly to coincide with the third anniversary of Dubai's £6bn bailout from Abu Dhabi, and its subsequent property market crash, it is clear that the country is keen to stress that the narrative that it has come full circle. The stock market surged on the news and the local press jumped on the announcements as evidence of a recovery. "Dubai on a white-knuckle ride to revival," read a headline in the English-language newspaper The National.
All the indicators are positive, particularly when it comes to tourism. Dubai's hotel occupancy is at a healthy 82 per cent and the number of foreign visitors grew by 10 per cent in the first half of the year. Over the past decade, the city has managed to position itself as a tourist playground, despite a steady drip of stories of Britons and other foreigners who have fallen foul of the strict laws on sex and alcohol.
Its bars and restaurants, many of them offshoots of familiar overseas establishments, remained thronged with expatriates and tourists in search of a good time.
While Lebanon and Egypt have seen their tourism industries badly hit by recent unrest, the United Arab Emirates has benefited by remaining an insulated safe haven – in part due to a no-tolerance approach towards dealing with dissent.
After diving in the wake of Dubai's debt crisis, the property market is also showing signs of recovery; rental prices have risen by 17 per cent over the past year. In scenes reminiscent of Dubai's headiest days, speculators can once more be seen queuing outside sales offices to invest in new developments.
"Dubai has turned a corner," said Simon Williams, a senior economist at HSBC. "Those who rushed to dismiss the emirate as nothing more than a bust real-estate story back in 2009 have been proved wrong."
But some question if it is too much too soon. The costs of Mohammed bin Rashid City have not been announced, but are expected to comfortably run into billions of dollars – raising concerns about financing when banks are still so cautious to lend.
"It is a hell of a statement to make in a pretty subdued international market," said a Dubai-based partner at an international property firm, who pointed out that investors in previous pie-in-the-sky projects that have since been shelved indefinitely may not be happy about the announcements.
The emirate is yet to fully disentangle itself from the fallout of the 2009 crash. A special tribunal set up to resolve disputes related to the bailout of Dubai World and subsidiaries, including Nakheel – the developer of the artificial palm-tree shaped island off the Dubai coast – is still sifting through claims. Lofty projects such as a new palm-tree island near Jebel Ali, 50 per cent bigger than the first and containing four theme parks, have stalled and look unlikely to be revived. A quarter of the city's residential units are empty, yet new building continues.
"Given the ongoing debt structuring and the emirate's various other problems, it seems to me the best evidence available of the ruler's ego, his lack of grasp on reality and the real need for sustainable economic development," said Dr Christopher Davidson, a lecturer at Durham University and author of Dubai: The Vulnerability of Success.
At the time of Dubai's bailout, there was widespread expectation that there would be strings attached by Abu Dhabi's rulers as the capital attempted to rein in its boisterous brother to the north, and the ambitious new plans are likely to be raising some eyebrows in the capital, where development has progressed with more prudence.
"The challenge isn't to generate growth but to ensure that the pace of growth is sustainable; some of the people I hear already seem to have forgotten the excesses that built up last time around and the damaging bust that they triggered," added Mr Williams.
You don't have to look far in Dubai to see the consequences of dreaming too big. An archipelago of artificial islands, shaped like a world map, is slowly being reclaimed by the sea.
In the desert outside the city stands the shell of the last large-scale leisure development – a 107-square-mile entertainment complex called Dubailand which was meant to house the world's largest array of theme parks. The signs for what would have been Universal Studios are whipped by the sand, and its gate leads nowhere.
Pie in the sky: Problem Projects
Palm Jebel Ali
Work to reclaim the huge palm-shaped island from the sea was completed in 2007, but the project was shelved in 2008 with building yet to begin. Fifty per cent larger than the Palm Jumeirah, the island was meant to contain theme parks and six marinas. A third palm island at Deira, which is five times larger, has also been mothballed.
Another of Dubai's grand reclamation projects, the archipelago is in the shape of a world map, and two-thirds of its 255 man-made islands have been sold. The only one developed is Lebanon; its owners opened a beach club in the summer.
Dubai City Tower
At 1.5 miles high, the Dubai City Tower never made it off the drawing board. The 400-floor building would have been three times higher than the Burj Khalifa and seven times taller than the Empire State Building. Its lifts were based on a vertical 125mph bullet train.
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