Dubai
A leader in finance, real estate, debt When its oil began running out, as its pearl industry did years earlier, Dubai set out to repurpose itself as a world capital of finance and real estate – two very bad bets in 2009, as it turned out.
Dubai is one of the seven emirates, or city-states, that make up the Persian Gulf’s United Arab Emirates. In the boom years, it dreamed no small dreams, attracting huge amounts of foreign capital and huge numbers of foreigners. Only 17 percent of its 1.5 million people are UAE nationals.
Dubai quickly became a world leader in superlatives. The Burj Al Arab, a sail-shaped building on an artificial island that is billed as the world’s second-tallest and most expensive hotel. The world’s largest manmade port. The world’s tallest tower. An enclave of artificial islands laid out like a map of the world. Three artificial islands shaped like palm trees said to be visible from space. And, when and if it’s finished, the world’s first underwater hotel.
Dubai set out to be a world financial center like New York and London. And like those cities, the music suddenly stopped for finance and real estate. Housing prices there have fallen nearly 50 percent this year, making the emirate a world leader in that particular category.
Dubai had been able to attract vast amounts of investment because investors assumed that Dubai and its oil-rich fellow emirate, Abu Dhabi, would stand behind the government-owned development companies.
But last month the government of Dubai said it was suspending payments for six months on $26 billion in debts owed by these companies. A key installment of $4 billion was to come due Monday. Suddenly the phrase “underwater hotel” began to take on a new meaning, one all too familiar to holders of overleveraged property.
At the 11th hour, Abu Dhabi did come through with $10 billion, buying a little time for Dubai to try to restructure $80 billion in debt, $60 billion owed by one company alone. The Associated Press says Dubai’s debts are roughly equal to its total economic output last year. Chalk up another superlative for Dubai.
Scripps Howard News Service