Builders and engineers responsible for the luxury developments that turned Dubai into a desert boom town have called on the British government to help them recover hundreds of millions of pounds in unpaid debts. Dubai's construction boom has been wiped out by the recession The Association for Consulting and Engineering (ACE) said some members have been offered just 65 cents on the dollar on unpaid fees by the emirate's best-known developer, Nakheel. Nakheel, which has built palm-shaped islands in the Gulf and has plans for the world's first kilometre-high tower, is dealing with a debt crisis caused by the collapse in the property market following the credit crunch. After a visit to Dubai, ACE's chief executive, Nelson Ogunshakin, described the situation as "chaos". He has written to Lord Mandelson (pictured above left), the Business Secretary, to ask for political intervention. The most important developers in the United Arab Emirates, including Nakheel, are part of holding companies owned either by the governments or rulers of the federation's seven emirates, particularly Dubai and Abu Dhabi. - UK Telegraph
Dominant Social Theme: Friends to the rescue.
Free-Market Analysis: We admit to a fascination with Dubai. Its non-Western, tribal culture is being grafted onto a thoroughly modern urban infrastructure that seems to be in advance of much that was available elsewhere in the West. Dubai seemed prominent in so many ways throughout the 2000s. It was regularly hosting tennis and golf tournaments that attracted the best of western athletes. Before the credit crunch it had launched an extremely effective media campaign that used much of the vocabulary of modernity, focusing on its green credentials, its high-finance attractiveness and polyglot but sophisticated culture.
Yes, it was very strange to see such an agile and worldly message offered up in an environment putatively no different than say, Saudi Arabia. But where Saudia Arabia, despite its wealth, remained seemingly backwards, and entrenched in an Arab backwater, Dubai's leaders raced ahead, not only absorbing Western culture but pointing the way to a new kind of society. It was providing Arabs with a shiny vision of the future and in doing so was building Paris on the Persian Gulf. Here's some more about Dubai's astonishing growth.
Real Estate and Construction (22.6%), Trade (16%), entrepôt (15%) and financial services (11%) are the largest contributors to Dubai's economy. Dubai's top re-exporting countries include Iran (US$ 790 million), India (US$ 204 million) and Saudi Arabia (US$ 194 million). The emirate's top importing countries are Japan (US$ 1.5 billion), China (US$ 1.4 billion) and the United States (US$ 1.4 billion).
Dubai's Jebel Ali port, constructed in the 1970s, has the largest man-made harbour in the world and was ranked eighth globally for the volume of container traffic it supports. Dubai is also developing as a hub for service industries such as IT and finance, with the establishment of industry-specific free zones throughout the city. Dubai Internet City, combined with Dubai Media City as part of TECOM (Dubai Technology, Electronic Commerce and Media Free Zone Authority) is one such enclave whose members include IT firms such as EMC Corporation, Oracle Corporation, Microsoft, and IBM, and media organizations such as MBC, CNN, BBC, Reuters, Sky News and AP.
The Dubai Financial Market (DFM) was established in March 2000 as a secondary market for trading securities and bonds, both local and foreign. As of fourth quarter 2006, its trading volume stood at about 400 billion shares, worth US$ 95 billion in total. The DFM had a market capitalization of about US$ 87 billion. The government's decision to diversify from a trade-based, but oil-reliant, economy to one that is service and tourism-oriented has made real estate more valuable, resulting in the property appreciation from 2004-2006. (Wikipedia)
The glory is fading. Dubai might have been on track to be an elegantly parched Paris, but the economic crisis has drained the region's prospects. We were surprised to see how fast Dubai shriveled over the past year. Dubai is still very much a British protectorate (you don't read much about that) and we figured the intervention might start there, if it were going to take place. Apparently it has. In fact, it seems Mandelson himself has been called upon to sort out the situation.
Peter Benjamin Mandelson, Baron Mandelson, PC (born 21 October 1953) is a British Labour politician who is the current Secretary of State for Business, Enterprise and Regulatory Reform, appointed on 3 October 2008. Mandelson is regarded as one of the main players, along with Tony Blair and Gordon Brown, of the modern Labour Party and its rebranding as "New Labour". He is often referred to by the nickname "Mandy" by much of the British news media. He was inducted into the House of Lords on 13 October 2008. Having helped Labour come to power in 1997, he was then forced twice to resign from Tony Blair's government while holding Cabinet positions. After his second resignation he served as the European Commissioner for Trade for almost four years, before being brought back into mainstream British politics by Gordon Brown. (Wikipedia)
OK, it will be interesting to see what kind of resources Mandelson and his cohorts will offer Dubai's increasingly desperate financiers. Dubai, in our opinion, is still a main player in the Middle East. It is, in fact, the carrot. See, if you want to build, say, a global government you have to use both the carrot and the stick. We all know about the stick part (see Iraq, etc.). But the carrot in our opinion is Dubai. It is to Dubai that the next generation of Arabs were going to look - to a city of magnificence and opulence far in excess of anything even the West had to offer. The importance of Dubai, then, is that it was to serve as a great instructional tool for the teeming, Muslim world. In fact in our humble opinion, it is yet a lynchpin in a strategy aimed at impressing and then co-opting billions of the Muslim intelligentsia outside the Western ambit.
Conclusion: For us, Dubai remains a fascinating place with its man-made islands, sail-shaped architecture and single-industry cities, incorporating white-collar luxuries and condos. Yet Dubai, this critical epicenter of world planning, is falling apart and its financial ruin shows how fast the global economy is unraveling -- and how unprepared the monetary elite is proving to be. It is, perhaps, a financial thermometer. Call it the Dubai Denominator. As goes Dubai, so goes the West?
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