UAE MUSINGS

Dubai bashing continues!

2009-07-26T08:32:00.000-07:00

Thought things were moving steady, until I read this article.

Broadband speeds comparison

2009-07-17T11:18:00.000-07:00

I was aghast when I took a casual result from a serious website regarding the ranks of countries when it comes to broadband speed. UAE ranks pathetically at rank number 103 and 130 for download and upload speeds respectively.

Check out the below link:

http://speedtest.net/global.php

You also could check your own ISP's speeds on this website for your connection.

Divorce rate down during recession!

2009-06-09T07:57:00.000-07:00

There is some bad news for divorce lawyers in the UK. They do not have enough cases to work on. Reuters reports the story.

Read it.

United Arab Emirates?

2009-05-28T10:34:00.000-07:00

The recent developments with regard to the GCC monetary union seem to have gone for a toss with UAE pulling out of the union. The article named Disunited Arab Emirates on Economist.com sheds light on the economics behind it.

Read it.

After the Gulf Boom?

2009-05-24T07:21:00.000-07:00

This sheds the light on what is in store for us after the boom in the region.

Read this.

Dubai Director of Finance Nasser Shaikh 'demoted'.

2009-05-20T07:13:00.000-07:00

There were 2 articles published on FT.com which concerned removal and demotion of Nasser Al Shaikh. Below are the articles:

1.Dubai minister removed on internal differences

The shock removal of Dubai’s de facto finance minister this week came as the result of an internal battle between him and a senior adviser to Dubai’s ruler, Sheikh Mohammed bin Rashid al-Maktoum, officials indicated on Tuesday.

The vacuum of information surrounding the departure of Nasser al-Shaikh, Dubai's department of finance chief, has set the Dubai rumour mill alight. But senior Dubai officials said on Tuesday he had fallen foul of a senior adviser to Sheikh Mohammed as Mr Shaikh gained a higher profile through his efforts to combat the effects of the global economic crisis.

Mr Shaikh, along with Omar bin Sulaiman, Dubai International Financial Centre governor, has recently led efforts to stem the crisis that has engulfed the emirate as its real estate market crashed and the global recession slowed other core elements of the economy, from trade to tourism.

They had been leading the disbursement of the $10bn United Arab Emirates central bank bail-out loan, half of which has already gone to meet delayed contracting invoices, with the rest going to a special fund to be set up over the next months by Rothschild to extend funding to other cash-strapped entities.

Mr Shaikh, who had said Dubai was expected to raise the second half of its $20bn (€.7bn, £13bn) bond programme later this year, helped rebuild trust with the banking community after other officials last year played down the impact of the crisis, even as house prices slumped and redundancies increased.

Philipp Lotter, a Moody’s credit analyst, said the agency would seek “confirmation that [Mr Shaikh’s replacement] remains committed to the government’s supportive policy towards its related entities, as this is an important pillar of our ratings in Dubai”.

Bankers, who are playing an increasingly important role in the economic future of Dubai as it seeks to refinance its $75bn-plus debt pile, also reacted with concern over the credibility of the department of finance.

Abdulrahman al-Salem, the new finance director, told Arab channel Al-Arabiya’s business website on Tuesday he was fully aware of the challenges facing Dubai, and how to address them, saying he would work with government departments to find solutions.

2.Shaikh demoted

Dubai on Monday night removed Nasser al-Shaikh as director-general of the department of finance, one of the most senior officials tasked with steering the emirate through the global financial crisis.

The emirate’s ruler, Sheikh Mohammed bin Rashid al-Maktoum, appointed as the new director-general Abdul Rahman Saleh al-Saleh, the national news agency reported.

No reason was given for Mr Shaikh’s removal. But his demotion to assistant director of external affairs at the ruler’s court will prompt concern among the region’s business elite and the bankers helping to steer Dubai out of the current downturn.

The highly regarded young official, who joined the department of finance only last year, was seen as one of the few who had grasped the scope of the economic problems facing Dubai.

The emirate’s globalised economy has been hit hard: its hyped real estate sector has crashed, while business services sectors have suffered from the global economic downturn.

Mr Shaikh had been leading efforts to pay off the emirate’s debts of more than $75bn (€55bn, £49bn) accumulated during the boom years, forming restructuring plans for the economy and measures to address the government’s cash crunch, which continues to leave many companies unpaid.

Mr Shaikh had been championing a more transparent approach to the emirate’s finances as a means to help restore the city’s credibility. He oversaw publication of the emirate’s most detailed ever budget in January and was leading efforts to launch a sovereign rating for Dubai.

As redundancies rose and profits slumped, Dubai, once the toast of the global media, has been hit by an avalanche of bad news.

Mr Shaikh led the appointment of Rothschild as the government’s adviser on setting up a financial fund to aid cash-strapped government-related bodies.

Dubai borrowed $10bn from the United Arab Emirates central bank in a bail-out loan, part of a broader $20bn bond programme launched in February. Half the funds have been disbursed to state-backed entities, such as the offshore developer Nakheel, to help them pay off contractors.

The department of finance issues the budget and oversees the finances of core government services, such as utilities and transport. Other commercial entities fall under the wing of government groups, such as Dubai World and Investment Corporation of Dubai, and the ruler’s personal conglomerate, Dubai Holding.

DIB? Are you an Islamic banking Institution?

2009-05-18T07:33:00.000-07:00

I am sick and tired of hearing this! DIB has from many years courted several controversies. And the latest swindling comes as no surprise. Is there anything that is deeper to it than the scandals. Zawya has a report.

What has Rothschild got for Dubai?

2009-05-18T07:20:00.000-07:00

The $10BN is literally at the mercy of Rothschild since they are the ones who decide who gets what. The article on The National explains this.

Visa for investors in Dubai---What's the CATCH?

2009-05-03T07:42:00.000-07:00

Seems as though the government of UAE is working hard to attract in order to attract investors. But there is a catch in the new visa rule that is brought in. Read this.

What a leader has to do?

2009-04-19T10:22:00.000-07:00

Sheikh Mohammed set an example by coming out into media and answering various questions that were unanswered or had ambiguity. A bold and right step at the right direction. Every leader has to do this. Communicate. Here are the excerpts.

IMF on UAE

2009-04-19T09:29:00.000-07:00

Everyone seems to have hooked onto UAE. Here is what IMF has to say.

As reported in FT.com:IMF sees UAE growth slowing.

Reply to the "dark side of Dubai"

2009-04-19T08:14:00.000-07:00

Guess there can not be a more fitting answer by Mr. Sultan al Qassemi to the article published on 'The Independent' . Here is what he tells.

Rothschild and Dubai

2009-04-15T10:29:00.000-07:00

As you might have read and heard in the media, Dubais Department of Finance has commissioned the Rothschild company as advisors to their 10 billion U$ fund which was issued by the UAE central bank last month. Rothschild operates an office in DIFC.
"I am confident that with the addition of Rothschild's expertise we will put in place an independent and rigorous process of qualification and oversight for the fund, which will help our businesses achieve their full potential beyond the near term challenges." Amen to that.

I was surprised that most people I talked to here, had no clue as to who the Rothschilds are. They also didn't know about their important role in both world wars, in the Balfour Declaration, in the founding of the State of Israel and in the international world of finance - first and foremost as the founders and owners of the Federal Reserve in the USA (which by all means is NOT federal by the way).

On a side note: Rothschild is not their real name of course, well now it is, but it didn't used to be. Also, the way the media pronounce the name 'Roths-Child- is wrong. The correct pronounciation is "Rot-shilled". Again, if we are to be made believe, that we should support the Palestinians, then by all means, I am sure there are 1000 better ways to do that, than to partner with the personification of Zionism. Do your own research. If you work in TV in the UAE, why don't you propose the movie "The House of Rothschild" be aired. Here's a video (part one) on the history of the Rothschild family.

Is international media accurate on Dubai coverage?

2009-04-13T09:21:00.000-07:00

Is the international media accurate on recent assault on Dubai's image?

At least 50% agree to this as per a survey.

Read On.

History of current credit crisis.

2009-04-12T09:22:00.000-07:00

Here is the brief history of the current credit crisis.

Dark side of Dubai !

2009-04-12T08:42:00.000-07:00

Is that all you got?
Respected editors of the UK and US(even Qatar did not spare us!) media, you can do much better.
One thing is quite sure that there is a co-ordinated assault on Dubai from the western media. And who's to blame for it? It is a million dollar question!

Below make a "DARK SIDE" reading:

BBC Panorama magazine: Dark side of the Dubai dream

ABC news: Dark Side of Dubai's Boomtown

Times Online: Dark side of Dubai's economic boom exacts harsh human toll

ME Times: Dubai's dark side-misery for Asians

Yalibnan.com: A rape case exposes Dubai's dark side and injustice

TIME: The Dark side of the dream

Arabnews.com: The dark side of splendour

Qatarliving.com: The Dark side of Dubai

The Independent: The dark side of Dubai

NPR.org: Dubai economic boom comes at a price for workers

Bloomberg: Dubai's Promised Land of Luxury Lures Women Into Sexual Slavery

The Guardian: Dark Dubai

Don't ruleout Dubai comeback!

2009-04-10T01:11:00.000-07:00

Traffic is thinner, housing prices are in freefall, and hotels are more affordable. Schools that once furiously turned students away are suddenly welcoming, and snobbish sports clubs are unexpectedly friendly.

This is the new Dubai - a city that, for the fortunate ones who are holding on to their jobs, now feels a lot more pleasant.

The gossip among expatriates - and they form the vast majority of the population - is about how the global financial crisis has arrested the city-state's wild ride and driven some of their friends away.

Even the most cynical residents admit Dubai is down but not out and that it will eventually make a comeback as a less exuberant and, above all, as a more liveable place.

It will take determination, however, to endure the economic downturn and to shift Dubai's mindset from insatiable ambition for bigger and glitzier towers to more modest aspiration and cautious crisis management.

It took months for the government to admit the emirate had overleveraged and overextended itself as it rushed to build the Middle East's leading business hub. Even today, Dubai remains obsessively keen to keep its problems out of the public eye.

Yet Dubai is also starting to act. It swallowed its pride and borrowed $10bn (with as much available still) from the federal government of the United Arab Emirates - in effect, its richer neighbours in Abu Dhabi - to help refinance its debts and to assist government-affiliated companies to pay their bills.

And it has started to restructure and to consolidate its sprawling government-affiliated conglomerates, which had thrived on competing against each other, feeding the construction frenzy that has now ground to a halt, and leaving contractors fuming about unpaid bills.

The Dubai model was based on thinking big and accomplishing the impossible, but the city-state has been forced to scale back as projects are put on hold or scrapped.

In the short term, there is more pain in prospect. Everyone in the city is waiting for the end of the school year to see how many expatriates leave. The government claims there are still more people moving in than out but some banks forecast the population will shrink by as much as 17 per cent.

To limit the pain, Dubai will have to act even more vigorously on two fronts. First, it has still to convince the markets it is capable of engineering a fundamental restructuring.

The emirate likes to be known as an outwardly, cosmopolitan city, but it has not come to terms with the responsibility alongside that - crucially, the need for transparency.

"We don't have a problem about Dubai repaying its debts. Our question is: can they implement what they have to?" says a senior banker. "They're not providing information and it's a badly timed silence."

Second, Dubai should find some way to allow expatriates who lose their jobs (and therefore their residency visas) to stay on in the city.

Lay-offs leave residents in a legal limbo, if not actually a legal nightmare, and the jails are filling up with people accused of bouncing cheques, which is a criminal offence in the emirate.

The scale of the problem has even prompted Dubai's police chief to call for a change in regulations.

"Dubai doesn't have legal infrastructure. But now that contractors are not being paid, employees are being laid off [and consequently] Dubai as a financial centre faces a big test," another banker points out.

If these central problems were to be tackled, then Dubai could, as its officials are hoping, be among the first to rebound when the global economy recovers. Dubai as the region's main business centre remains viable.

Even neighbours that secretly rejoice at its present distress will admit that.

Despite the misguided focus of recent years upon real estate, the economy has solid foundations. Dubai, after all, is the region's main trading hub, with ports and airports unmatched in the Gulf. Tourism, too, will recover, and the emirate will probably remain the favourite finance base for the Middle East.

As one eminent businessman expresses it: "By [forming] a service economy, Dubai has become a clearing house for this part of the world, where suppliers of goods and services meet buyers."The city-state will endure two bad years, he forecasts. But he concludes by insisting: "[Even as] a scaled-down version, it will still work."

Dubai's bail-out!

2009-04-05T07:20:00.000-07:00

Abu Dhabi bails out its neighbour. What will it ask in return? Following article on The Economist has a great reading.

Read.

Printing money is the right way to get us out of this mess

2009-04-05T07:19:00.000-07:00

US is printing money out of thin air. And they think this is the right solution for this. The following article is an eye opener.

Credit crisis - how it all began?

2009-04-05T07:16:00.000-07:00

Suddenly, one August day last year shook the world, turning an Edwardian summer of prosperity into a grim financial crisis

On the face of it, there was nothing especially memorable about August 9 2007. With the holiday season in full swing, Britain was in relaxed, even soporific mood. House prices were rising, unemployment was falling, the economy was growing at an annual pace in excess of 3%. Gordon Brown, prime minister for six weeks, was enjoying a honeymoon with the voters and Labour had a 10-point lead over the Conservatives. The sports pages were full of cricket and the build-up to the new football season.

It was, however, the day the world changed. As far as the financial markets are concerned, August 9 2007 has all the resonance of August 4 1914. It marks the cut-off point between "an Edwardian summer" of prosperity and tranquillity and the trench warfare of the credit crunch - the failed banks, the petrified markets, the property markets blown to pieces by a shortage of credit.

On that day, the European Central Bank and the US Federal Reserve injected $90bn (£45bn) into jittery financial markets. But two days later, Gordon Brown said Britain was in "as good a shape as it could be to weather the storm".

It has turned out rather differently than he expected. The anniversary of the credit crunch this week is marked by house prices falling at their fastest rate on record, consumer confidence at rock-bottom and looming recession. Brown could soon join the growing list of those losing their jobs.

Alistair Darling, who has had the most troublesome first year as chancellor since Denis Healey in 1974, says that nobody expected the seizing up of the markets in August last year to have such profound consequences. Mid-September, which marked the 15th anniversary of the speculative attack on the Bank of England precipitating Britain's departure from the exchange rate mechanism and condemning the Tories to a generation in opposition, saw queues for three days outside branches of Northern Rock - the first run on a leading high street bank since the demise of Overend, Gurney & Company in the 1860s.

Even then, optimists were telling the chancellor that things would start to pick up in the first three months of this year, or at worst in the second quarter. Darling, one of the Cabinet's Eeyores, took a more cautious view but even he has been surprised by the length, depth and breadth of the crisis. This week, the chancellor is in temporary control of the country while Brown is on holiday; next month he and his boss plan to announce a recovery plan designed to show that Labour has not lost control of events.

Squeezed

It will be no easy task. Firstly, this is a different sort of war. Labour had its economic problems during its first decade in power, but in retrospect they were skirmishes rather than full-scale battles. The years leading up to August 2007 had seen the development of new and sophisticated ways for the financial markets to make - and, as has subsequently been revealed, lose money. Consumers in the US and Britain were living beyond their means, borrowing money to buy houses and fund their spending habits. Asset prices - particularly the cost of homes - rose rapidly, presenting seemingly insurmountable problems for first-time buyers. Lenders solved this difficulty by relaxing criteria for granting a loan. They then bundled up the poor-quality loans, mixed them up with some good-quality mortgages, and sold the packages of debt in a process known as securitisation. By the summer of last year, the money raised through securitisation was funding more than half of Britain's home loans.

Warnings came thick and fast from the International Monetary Fund, the Bank for International Settlements, the Bank of England and others that markets were not taking the risks of this business seriously enough. The biggest risk was a steep fall in house prices, since securitisation was based on an assumption that any problems faced by squeezed borrowers would be massaged away by strong property markets.

By last summer, it was clear that the housing market in the US was in free-fall and that mortgage-backed securities were worth less - a lot less - than those holding them imagined. With nobody sure how big the losses might eventually be, the markets abruptly lost the two ingredients vital to keep them vibrant - confidence and trust. Banks first stopped lending to one another, then sought to repair their finances by cutting back on lending to their customers. Borrowing became harder to arrange and more expensive - the classic definition of a credit crunch. Cheap and easy credit has been the lubricant for both the US and UK economies in recent years; without it they have started to seize up.

The second big problem for policymakers, not just in Britain but around the world, is that they are fighting a war on two fronts. Central banks and finance ministers are grappling not just with the credit crunch, but also with rising inflation. On August 9 last year, crude oil was trading at just over $70 a barrel; it peaked last month at more than $145 a barrel and still stands at over $120 a barrel. Rising food prices have also pushed up the cost of living, making it harder for central banks to justify cuts in interest rates - traditionally the first line of defence in a credit crunch.

The US Federal Reserve has been the most aggressive, cutting its key lending rate from 5.25% to 2%, but the Bank of England and the European Central Bank have been far more circumspect. Threadneedle Street has shaved 0.75 points off borrowing costs in but has not moved since April and with rising energy bills likely to push inflation close to 5% in the coming months is thought more likely to raise bank rate than cut it when the Bank meets this week.

Time and again hopes have risen that the crisis might be coming to an end. Last August, it was seen as just another bout of turbulence in the financial markets (the story took more than a week to become the lead story in the Guardian); then there was the hope that the run on Northern Rock was a catharsis.

In December the intervention by the world's leading central banks to unblock money markets was seen, if not as the beginning of the end, as the end of the beginning. The Federal Reserve bail-out of Bear Stearns in March was accorded the same status, as was last month's rescue for the pillars of the US mortgage market - Freddie Mac and Fannie Mae.

False dawns

One hopeful sign is that the wholesale money markets appear gradually to be returning to normal, with banks less wary of lending to one another. Emergency packages from the central banks have helped, but the repeated false dawns have made policymakers cautious about claiming victory.

With evidence that the crisis is spreading from the financial markets into the economy at large, those who claimed "it will be all over by Christmas" have fallen silent. The Bank of England says the story is still unfolding, seeing its job now as to re-shape Britain's financial regulatory system so that - in the words of one official - there is a gleaming new fire engine in the garage - and no prospect of a fire for a few years.

Quote by Thomas Jefferson on Bankers

2009-02-26T07:36:00.001-08:00

One quote that quite suits the current scenario.

Abu Dhabi rising!

2009-02-26T07:31:00.000-08:00

Dubai has the spotlight, but another emirate is starting to call the shots.

Mohammed al-Abbar, one of Dubai's most prominent real estate tycoons and a member of the emirate's ruling council, wanted to set the record straight in a speech at the Dubai International Financial Center. It was not a happy occasion. A day earlier, the government of the United Arab Emirates announced it would help merge and finance two struggling Dubai-based mortgage lenders, Amlak and Tamweel, a sign that the global financial crisis was snapping at the heels of the emirate's credit-fueled boom.

"I will not mince words," al-Abbar told his audience in late November. "I am here to state facts."

Dubai, he said, was going through a "healthy" correction to property prices. Yes, the emirate did owe about $10 billion in sovereign debt, with an extra $70 billion owed by "affiliated companies," but al-Abbar said its $350 billion in estimated assets would be more than capable of meeting these obligations. As for the rescue of Amlak and Tamweel, al-Abbar said it was an example of how Dubai's economic advisory council would act in a timely and transparent manner under his leadership.

But even al-Abbar could not mask the growing importance of Abu Dhabi, seat of the United Arab Emirates' federal government, when it came to Dubai's future. He underlined Dubai's "proud identity" as part of the seven-member UAE, and said that countrywide measures to bolster the federation's financial system were a reminder of economic unity. "We stand by our guarantees, as one country," he said.

These words were a major turning point, according to Christopher Davidson, a British academic and author of several works on the UAE. For most of 2008, he said, Dubai's technocrats would have been flying the flag of autonomy, backing the emirate's past tendency to resist the centralizing, federalist urges of neighboring Abu Dhabi. But with the financial crisis squeezing credit flows and pushing foreign investors to withdraw to less risky climes, the power balance was now shifting to Abu Dhabi's healthier balance sheet and political clout.

Abu Dhabi has built up a huge budget surplus over the years, thanks to its lucrative oil revenues, state-backed investment funds and its unwillingness to splash the kind of money that Dubai is prepared to spend. Oil-starved Dubai relies more on international capital flows, leaving its balance sheet less able to withstand shocks to the financial system. The result is an expected deficit of $1.1 billion this year, according to a Reuters interview with Dubai official Nasser al-Shaikh.

But this is not simply a rerun of the past year's credit crunch, with Abu Dhabi as the U.S. Treasury bailing out Dubai's deregulated Wall Street. Don't expect part-nationalization of flagship firms any time soon. The two emirates are more like rivals competing for global leadership on a number of different playing fields, from tourism to aerospace. That means Abu Dhabi's own growth plans could benefit from a slowdown in Dubai, while discreetly making sure that the fallout is contained.

"Abu Dhabi has been crowding into several spaces that Dubai is trying to command," said Jim Krane, author of a forthcoming book on Dubai, The Story of the World's Fastest City. He described Abu Dhabi's launch of Etihad Airways in 2003 as a direct challenge to Dubai-based airline Emirates."Now, Abu Dhabi stands to gain if Dubai slips."

And Dubai is slipping. Its double-digit economic growth is reportedly expected to fall by more than half to around 4%-6% this year, while Abu Dhabi is forecasting a more modest slowdown to around 7%. Dubai's real estate sector, once the jewel in its crown, is unraveling at an alarming rate, with projects put on hold and companies cutting jobs. Earlier this month, Britain's Casa Dubai, which specialized in selling Dubai property to British consumers, went into liquidation after admitting that it had made "virtually nothing" in sales since August. In a statement on its Web site, the company even said a major developer had gone on the run from the police with 500,000 pounds' worth of clients' money.

Not everyone believes this spells doom for Dubai. HSBC (nyse: HBC - news - people ) economist Simon Williams told Forbes that the quality of the emirate's service sector was unequaled in the region, and that Abu Dhabi would not necessarily take its place as a result of the slump. "Growth will be stronger in Abu Dhabi this year," he said, "but anyone doing business in the UAE has always recognized that Dubai and Abu Dhabi are very different places."

Abu Dhabi's reliance on oil revenues is also a problem, with oil prices down more than 70% since their summer peak of $147.50 a barrel last year. But the emirate's wide-ranging development plan is paving the way for something more long-lasting, with investment in energy, technology and even intellectual capital--symbolized by the opening of satellite campuses for New York University and Paris' Sorbonne--quietly balancing out the more obvious big hotels and golf courses.

"The economy Abu Dhabi is building is recession-proof," said Davidson. "Yes, it does have tourism, yes, it does have real estate, but these are not central pillars of the new economy. These are icing on the cake."

Dubai govt says state firms can tap $10 bln bond cash

2009-02-26T07:23:00.000-08:00

Dubai said on Wednesday $10 billion in bond proceeds from the United Arab Emirates central bank would be enough for now to help state-linked firms settle debts and restructure to tackle an economic downturn.

The former Gulf boom town would give loans on a case-by-case basis to wholly or partly state-owned companies looking to repay debts maturing this year as well as to meet other commitments, said Nasser al-Shaikh, director-general of Dubai's Department of Finance.

Real estate companies in Dubai, where the property sector has crashed after a six-year boom, would be among the main beneficiaries of state aid, he said, declining to say how much debt Dubai firms would repay in 2009.

'We understand that some entities might face difficulties in refinancing because of the global credit crisis,' he told a media briefing in Dubai, part of the seven-member United Arab Emirates federation, the world's fifth-largest oil exporter.

'By protecting the major players in our economy, automatically we are protecting our economy,' he said.

The Gulf Arab trade and tourism hub is ready to issue a second $10 billion tranche when needed and was considering a stimulus package for small and medium enterprises, the details of which could be unveiled within three weeks, Shaikh said.

Markets had worried for much of this month that Dubai, which borrowed heavily to support expansion during a regional economic boom fuelled by high oil prices, could be left to default on some $15-20 billion in debt due for refinancing this year.

Concerns that Abu Dhabi, holder of more than 90 percent of the UAE's oil reserves, might not help Dubai have led credit default swaps (CDS) for insuring the debt of some Dubai entities to rise to levels exceeding those of crisis-hit Iceland this month.

'I'm looking for the funds to be used defensively, to insulate Dubai from the worst effects of the global credit squeeze,' said Simon Williams, regional economist at HSBC (nyse: HBC -news - people ).

FEDERAL BACKING

CDS on Dubai sovereign debt, which dropped about 200 basis points (bps) after the bond issue news, fell another 20 bps on Wednesday to 705 bps, according to Standard Chartered(other-otc: SCBEF.PK - news - people ) data. Abu Dhabi is the main contributor to the UAE federal budget.

'Many foreign observers continue to mistakenly see the UAE as distinct from Dubai,' Shaikh said, adding the bonds -- which are not backed by assets and are secured by Dubai -- sent a 'clear message' that the federation would stand by the emirate.

But the loans are not without conditions. Dubai has already scaled back a dramatic expansion plan that saw it step onto the world stage by building the world's tallest tower, as well as islands shaped as palm fronds and the world map.

Hundreds of billions of dollars of projects have been put on hold or cancelled and Dubai faces a budget deficit this year.

'We will have our conditions ... we cannot forget this money is borrowed at a sovereign level,' Shaikh said.

Companies tapping the support fund would have to pay back the loans at a price at least equal to the 4 percent Dubai is paying on the bonds, and repay the loans once the financial climate improves, he said.

The mechanism was still being worked out but cash could be lent directly to firms or through banks, Shaikh said, adding that using the entire $20 billion would be the 'worst-case scenario'.

Fitch Ratings said on Wednesday the bond programme was an 'important step' in Dubai's efforts to manage economic challenges and would reflect well on state-linked companies.

The Dubai fund follows 120 billion dirhams ($32.67 billion) of funding facilities set up last year by the UAE central bank and finance ministry to support banks.

Any decision to recapitalise Dubai's banks, as Abu Dhabi did earlier this month, would have to be taken by state-owned Investment Corp. of Dubai, Shaikh said.

Exclusively for TR.

Dubai's jolt back to reality

2009-02-26T07:19:00.000-08:00

Optimism surrounding $10BN bond issuance fades

It was billed as the greatest boost to business confidence in the United Arab Emirates yet. After months of capital outflows, canceled real-estate projects and evaporating liquidity, Dubai revealed on Sunday it had raised $10.0 billion from the UAE federal government in Abu Dhabi.

The announcement sent stocks soaring nearly 8.0% on Monday, eased spreads on credit-default swaps and was cheered by business leaders and beaming politicians splashed across the pages of the UAE's newspapers.

But by Wednesday, the mood in Dubai dimmed. Most of Monday's gains had been clawed back, with the Dubai Financial Market Index back down to 1,568.06 points, or around 7.6% below Monday's close of 1,652.98 points. Dubai's iconic government-owned developer Emaar Properties sank 2.4% on the stock market Wednesday, to 2.05 UAE dirhams ($2.61), while interior contractor DEPA fell 2.3%, to 0.43 UAE dirhams (55 cents). Both companies are part of a review of Dubai's major government-owned enterprises by Moody's, which could see their credit ratings cut. (See"Opaque Dubai Faces Ratings Action.")

The backlash after the initial surge may represent the many unanswered questions surrounding the so-called "bailout" of Dubai. The emirate said on Wednesday it would use the $10.0 billion on a case-by-case basis to help wholly or partly state-owned companies repay short-term debts. But to truly restore investor confidence, a more comprehensive stimulus package with direct intervention in the real-estate and mortgage-lending markets would be needed. The emirate's construction boom is unraveling, with property prices down an estimated 20.0% to 25.0% from their peak last year; even if the fresh influx of precious billions helps a developer like Nakheel repay corporate bonds, it won't grease the wheels of additional real-estate financing or prop up prices.

"I can't see how this bond issue would be immediately or directly beneficial to the real estate market unless the government introduced some sort of package which might shore up the mortgage default risk or ring-fence properties in default," said Chet Riley, an analyst with Nomura International. "But this would then assume the exit risk, which would be considerable."

As for the second $10.0 billion chunk Dubai said it planned to raise on Sunday -- presumably by issuing five-year bonds on the open market, rather than sealing another Abu-Dhabi deal -- speculation was mounting Wednesday that this would not take place until 2012 or even 2013. Nomura's Riley told Forbesthat with a planned coupon rate of 4.0%, such a bond issue would not be warmly greeted in the current environment. Although this yield is still higher than for sovereign debt issued by Britain, Germany or the U.S., 4.0% does not price in the full extent of comparable risk.

As reported by TR. Compiled from few articles.

Emirate on the ebb.

2009-02-22T07:00:00.000-08:00

By Simeon Kerr in Dubai

At the height of Dubai’s recent boom, thousands of foreigners were arriving every day to seek their fortunes in this Gulf city of boundless ambition. Now, vehicles in the car park outside the airport gather dust as redundant expatriates abandon their wheels, fleeing home before they default on automotive loans and risk imprisonment.

Officials in the emirate were until the last few months unruffled by the credit crisis and a dramatic fall in oil prices, arguing that the services-led economy had not been affected. Indeed, they maintained, it would provide a safe haven for bankers and western companies suffering from the global downturn.

Dubai’s six-year boom, which rode the regional petrodollar wave, was fuelled by the city’s infrastructure and quality of life rather than by oil itself, of which the emirate has little. But the very openness of an economy built on finance and property investment now leaves it ill-placed to weather the storms raging elsewhere.

Amid a collapse of business and consumer confidence (see chart), financial and property companies have been shedding thousands of workers. The once steady stream of British tourists is also drying up as recession bites in the UK and sterling collapses against the dollar-pegged dirham.

The United Arab Emirates, of which Dubai is part, had to support the banking system with a Dh120bn ($33bn, £24bn, €25bn) package and bail out Dubai’s two mortgage providers as the city’s property bubble burst. Credit default spreads on the emirate’s debt have since ballooned on worries that it might not be able to repay creditors without the help of the UAE’s capital, oil-rich Abu Dhabi.

Bad headlines such as these are not part of the Dubai script of perennial growth. In response, Sheikh Mohammed bin Rashid Al Maktoum, the emirate’s ruler, has formed an advisory council to steer Dubai through its greatest challenge since the Gulf was plunged into its own 1930s depression when the pearling industry collapsed.

Mohammed Alabbar, the charismatic chairman of Emaar Properties, a local developer, was chosen to chair the nine-man body. Unlike some of the relative youths who run the vast commercial enterprises linked to the government and collectively dubbed “Dubai Inc”, Mr Alabbar has lived through other crises: he made his name turning around the fortunes of a Dubai business that went bust after the 1980s Asian property bubble. “We are going to tighten our belts, roll over and pay off debt, and be really trim over the next year,” he says.

Sheikh Mohammed for years encouraged his top lieutenants to compete against each other to create the biggest and best developments. Such competition quickened the city’s growth but it also encouraged increasingly grandiose projects founded on debt. As bullish growth scenarios began to confuse unusually loose credit conditions with a new paradigm in global finance, Dubai was seen as a crucial staging post in the shift in economic power from the west to emerging Asia.

Now, these officials are working together on the same committee to prevent the global slowdown leading to a Dubai meltdown. “We are now sitting together for the first time in a long time,” says Nasser al-Shaikh, director-general of the department of finance and another advisory council member.

Mr Shaikh says ambitious growth targets of 11 per cent a year until 2015 have been reined back to 4-6 per cent. The government is also planning a fiscal stimulus that will increase government spending by 42 per cent this year.

But by the time the council went public with its findings in November, the rapid deceleration had given rise to speculation that Abu Dhabi, the richest member of the UAE, might have to bail out its flashier neighbour. Rumours spread that Abu Dhabi would only stump up the cash if Dubai ceded control of its successful airline, Emirates.

Federal support has come through folding Dubai’s troubled mortgage companies into well-capitalised Abu Dhabi banks. There have been other direct discussions between Dubai and Abu Dhabi state companies, although none has reached agreement.

Sheikh Mohammed’s Dubai International Capital fund, whose assets have shrunk sharply, briefly courted investment from Mubadala, the Abu Dhabi investment arm. No substantive discussions ensued, people close to the matter say, but the incident fuelled rumours of a bail-out. Well before the credit crisis raised questions about Dubai’s solvency, Mubadala and Dubai Aluminium had been discussing equity restructuring of their joint venture, Emirates Aluminium, a vast smelter on the Abu Dhabi/Dubai border.

Dubai officials insist they will handle their own problems, only seeking federal support as a last resort.

The most pressing issue for the emirate’s reputation is restructuring its $80bn debt, around one-quarter of which is estimated to be maturing this year. Moody’s has raised concerns that Dubai’s high debt, at more than 100 per cent of annual gross domestic product, could force it to seek support from Abu Dhabi. Fitch, meanwhile, has downgraded the debt of rated state-linked companies in the emirate.

State-linked companies have already paid off more than $2bn in outstanding debt. The next big refinancing, Borse Dubai’s $4bn loan, should provide an insight into the emirate’s risk profile among international creditors.

The government also believes it has been understating GDP, making its debt levels look more burdensome than they are. A new 2007 figure of $70bn-$80bn will soon be announced as the statistical department upgrades 1980s methodology responsible for the current figure of about $50bn for 2006.

Bankers worry that the government remains in denial about the depth of its problems, given the slowdown facing its services economy and the closure of international financial markets. “Dubai is still just trying to market its way out of this huge hole,” says one.

Dubai’s property market, once a favourite destination of foreign investors, is in need of financial surgery as developers face a collapse in sales amid dire investor sentiment and banks shy away from providing mortgages. Prices fell 23 per cent between the third and fourth quarters of last year, according to HSBC’s index covering mortgage issuance – although anecdotal evidence suggests some distressed properties are selling at about half pre-summer peaks.

Officials say that projects not yet sold to the public – as much as half all announced developments – will be shelved until market conditions improve. The government is also considering helping developers who are finding it hard to complete projects. But more building sites are falling silent as funds dry up, despite Mr Shaikh’s assurances that government will not allow the city’s skyline to be marred by half-built structures.

The authorities have yet to reveal a plan for financing the property sector, having assumed that deposit injections into the country’s banks last year will be enough to revive lending. The government estimates that, at most, 34,000 units will enter the market this year, only half the number predicted by several research reports, including Morgan Stanley’s August forecast in which the US bank also spoke of a 10 per cent price decline by 2010.

Chris O’Donnell, chief executive of Nakheel, a government-owned developer, says it has the resources to cope as it slows work on a variety of projects, such as the Trump Tower on its landmark Palm Jumeirah island. He paints a rosy picture of the company’s first major refinancing, a $3.5bn Islamic bond, in November this year. Nakheel’s credit default swaps indicate that investors are more worried about Nakheel than other parts of Dubai Inc. “The world will be a totally different place [by November] and we don’t think there will be any refinance issues at that point,” says Mr O’Donnell.

With local banks reluctant to lend, financing Dubai’s property and infrastructure developments will remain its greatest challenge this year. “Possible access to federal [UAE] funding will drive how much Dubai can and cannot do to maintain growth,” says Jeffrey Culpepper, Middle East head of investment banking for Credit Suisse. “If you look at all the mega-projects announced, without federal funding and with the current dislocation in the global finance markets, some will be hard to finish on schedule.”

So Dubai’s ambitions may rest not only on the health of the global economy, and with it a revival of the oil price, but also on the attitude of global banks and capital markets. Dubai has spent three decades transforming itself into a global city; its future now depends on the world reciprocating this grand vision.

How Worried Should We Be About Dubai?

2009-02-22T06:56:00.000-08:00

By Rachel Ziemba

In recent weeks CDS spreads on the debt of Dubai’s largest State-linked vehicles like Dubai Holding etc shot up dramatically after Abu Dhabi announced a unilateral recapitalization of its banks. The cost to buy protection on the 1 year bond has doubled since late January and now stands at 1073bps. The jump in the 5 yr has been less sharp but stands at over 1400bps. Since Dubai has limited sovereign debt (about $10b and maybe climbing given the likely fiscal deficit) so these large state-linked companies provide a proxy for the perceived credit worthiness of Dubai’s government. Given Dubai’s debt stock ($80b or 148% of GDP, seeMoodys recent research for a breakdown), its vulnerability to global liquidity and the worsening outlook for its domestic property market despite the ability to control supply, it is perhaps not a surprise that the outlook for the emirate seems much more precarious, particularly in contrast to its cash rich neighbour, Abu Dhabi. Given the links of these debtors to the government, and the effect that their vulnerabilities could have on the UAE federation, it has widely been assumed that the UAE govt (or rather Abu Dhabi) would come to the aid of Dubai when the crunch came. However, there has been more uncertainty than some expected. Key tests are ahead in coming months as Dubai adjusts to a world where leverage remains scarce.

Around $20b of the outstanding debt ($80b) comes due in 2009, including several large syndications like that of Borse Dubai which was having trouble rolling over its $4b loan that expired at the end of February. Breaking views notes that the $4b capital needed is a test case as allowing the institution to implode would have broader reverberations. It now seems that the UAE federal government might be coming to the rescue. Meed suggests that it will loan Borse dubai $1b to make up the shortfall. Borse Dubai only managed to secure $1.25 billion of commitments from commercial banks, although some further commitments from banks could bring the final bank tranche to $1.5 billion. Even the capital that Dubai attracts will come at a higher cost. Borse Dubai might have to pay 430bps above Libor rather than the 130bps the maturing loan carried.

Unlike some of its neighbours (especially Abu Dhabi) Dubai’s growth was primarily debt financed, making it more vulnerable to the global liquidity crunch and more local liquidity tightening triggered first by the withdrawal of speculative capital and – later by the fall in the oil price. Although Dubai has little oil, it was clearly a petrodollar recycling hub. It accounted for much of the UAE’s external debt stock (some of Abu Dhabi’s state investors like Mubadala and others accounted for the rest ). Dubai based banks likely also accounted for much of the bank lending to the UAE. Moodys vulnerability indicators show that the UAE is among the most vulnerable in the MENA region (if much less vulnerable that Eastern European countries that are being forced to rapidly and painfully adjust.

Data from the BIS (see chart below) show that loans extended to the UAE first tapered off and then fell in Q2 and Q3 of 2008 (the most recent data) This is consistent with the outflows of short-term capital once dirham revaluation was taken off the table that contributed to a local credit crunch as well as the the escalation of credit crunch on a global scale and a reluctance to lend to the Gulf as the oil price began to fall. Of remaining loans, UK banks are most exposed. Looking at shifts in the UAE’s central bank reserves details the scale of this flows. The UAE’s reserves doubled to almost $100 billion but have subsequently fallen to $44 billion at the end of Q3 (most recent data). No wonder the project finance costs and domestic interbank rates shot up.

Liabilities of BIS banks to UAE

The following gives an outlook of how net flows of funds (deposits abroad - loans) of the UAE compare to the rest of the GCC. the UAE has consistently borrowed more from foreign banks than it has borrowed abroad for the last 18 months. Despite the drop in loans extended to the UAE, it continued to be a net borrower from the international banking system - unlike for example Saudi Arabia or Kuwait.

Dubai is experiencing a property bust. Prices and volumes have been falling for some time and even efforts to control the supply (by merging and providing capital to the main mortgage lenders or pulling back on projects have had limited effect.) The secondary market in particular has dried up. Meanwhile with a number of foreigners losing their jobs will be another blow to consumption and property markets.

It has been widely assumed that oil-rich Abu Dhabi would come to Dubai’s aid in one way or another, providing the needed capital and solidifying Abu Dhabi’s role within the power structure of the UAE. It seemed likely that federal institutions were taking the upper hand – including the central bank. In fact the first UAE government responses to the financial strains on UAE banks seemed to be evidence enough. But the next stage has been less unclear.

Moreover the structure of some of the liquidity provided including the temporary ‘repo window’ still created disincentives for banks to take advantage of the funds – likely because authorities wanted to force regulatory changes to stem the significant credit growth. While most UAE banks received long-term deposits back in the fall from the central bank, they remain undercapitalized given the loss of whole sale financing and the fact that the property bust is undermining the quality of underlying assets – property, credit card debt etc. Standard chartered suggests that UAE banks need an additional $27 billion to be adequately capitalized. Other institutions like a permanent repo window and other tools to control the money supply are also needed. These capital needs persist despite Abu Dhabi’s injections to its banks, however, the support of the emirate’s government does add to the stability of financial institutions there and reduce the risk of systemic risk. Abu Dhabi provided capital injections to five banks operating in the emirate in the form of 5 year deposits. Yet allowing a default of a major state-linked banks could have broader reverberations in the region.

Why hasn’t Abu Dhabi made more funds available to Dubai given that the uncertainty undermines UAE asset quality and the “UAE brand”? One explanation might be politics between the emirates. Reportedly Dubai has not actually asked for funds, perhaps fearing a loss of autonomy.

However, even Abu Dhabi’s stock of liquid assets might not be quite as high as it might like. In a recent paper, Brad Setser and I argue that the funds of the Abu Dhabi Investment Authority (ADIA) may never have been as large as some observers thought (we peg its peak at close to $480b early in 2008 and suggest it may have suffered valuation losses that took its AUM down as low as $300b (watch later in the week for some updated calculations on a range of sovereign funds). The calculations are based on an index based portfolio so we might be a bit off. However, given that liquidity is at a shortage and Abu Dhabi may also run a fiscal deficit, it may prefer to preserve its capital for investments prioritized for domestic development.

Yet it is not in its interest to let too large a gap in credit worthiness emerge with Dubai particularly as its banks and institutions are exposed to Dubai’s property markets (perhaps accounting for the extra liquidity injection.) Furthermore there are risks that the property markets and financial institutions throughout the region even if most countries are more insulated. Abu Dhabi may prefer to avoid such a bust. But as Moody’s notes, the corporate sectors of the GCC have not been tested in this way in the past and do face significant financing needs.

Broader cost cutting is going on in Dubai including several mergers in the property sector and job reductions. Dubai International Capital and Dubai Group, investment focused entities belonging to Sheikh Mohammed plan a quasi merger. This seems to make sense and may reduce overcapacities. In fact these two entities always seemed to be encroaching on each others turf (investment in financials, private equity holdings etc) in a UAE that was serving as a laboratory for investment abroad, though recently Dubai group was reportedly branching into Islamic finance. Furthermore like others relying on leverage their business model has come under challenge. The sharing of back office support may be the first step to a re-merger. Needless to say, any funds and projects overly reliant on leverage should continue to be very quiet (the QIA might be one exception)

The combination of much more subdued credit growth, reduction in oil production and reduction in non-oil trade and services will keep the UAE’s growth weak in 2009. The country’s non-oil diversification has exposed it to sectors that are faltering globally (shipping, tourism, property, finance). Government support and the fact that many sectors are centralized can cushion the blow somewhat – fiscal policy is expected to be expansionary, the budgets of the UAE federal government (which spends mostly in the smaller five emirates) and Dubai show expenditure growth in 2009. Abu Dhabi will likely do so also though its budget has not been disclosed. Yet there is a broader question where will the funds come from or what price will be charged to get there. Yet given the direct linkages between the UAE’s borrowers and the national and sub-national governments, funds should be forthcoming even if they are pricy and become more so with oil at $35 a barrel.

Vulnerabilty of success

2009-02-22T06:53:00.001-08:00

Great article by Peter Lewis

Arab tycoons wrapped in traditional headscarves sipped fruit juice cocktails as they watched Russian models twirl in silk dresses.

It was the most exclusive ticket in town, a private catwalk show to which the Middle East's biggest spenders had been personally invited.

But if the smiles at this week's Dubai fashion event looked more false than usual, it was for a reason. The net worth of the VIPs in attendance today is a fraction of what it was six months ago.

A six-year boom that turned sand dunes into a glittering metropolis, creating the world's tallest building, its biggest shopping mall and, some say, a shrine to unbridled capitalism, is grinding to a halt.

Dubai, one of seven states that make up the United Arab Emirates (UAE), is in crisis.

So too are British expatriates. Many of the estimated 100,000-strong community came here expecting to make millions in property, and to soak up a lavish lifestyle living alongside footballers, actors and supermodels.

But the real estate bubble that propelled the frenetic expansion of Dubai on the back of borrowed cash and speculative investment, has burst.

Many westerners are being made redundant or absconding before the strict legal system catches up with them.

Half of all the UAE's construction projects, totalling $582bn (£400bn), have either been put on hold or cancelled, leaving a trail of half-built towers on the outskirts of the city stretching into the desert.

Among the casualties is the tower Donald Trump promised would be "the ultimate in luxury", a $100bnresort complex by the beach, and four huge theme parks and an artificial island developed by the state company Nakheel.

It is not all bad news: the building projects still in play are almost the equivalent of the US stimulus package. And the city remains a haven for super-rich sheikhs, billionaire hedge fund managers and Russian oligarchs.

But banks have stopped lending and the stock market has plunged 70%. Scrape beneath the surface of the fashion parades and VIP parties, and the evidence of economic slowdown are obvious. Luxury hotels are three-quarters empty. Shopkeepers in newly-built malls are reporting a drop in sales. In Dubai you expect to see a Ferrari parked beside a Rolls-Royce. But not, as is the case now, with scruffy For Sale signs taped to the windows.

Living the dream

Nowhere sums up the fortunes of expatriates in Dubai quite like Palm Jumeirah, an artificial island fanning out into the Persian Gulf, populated by residents including the likes of David Beckham, Michael Schumacher and even, it is said, Afghanistan's president, Hamid Karzai.

At the top of the island stands the Atlantis, a garish $1.5bn hotel complex with 1,539 rooms and a whale shark swimming in a 1 million-litre fish tank.

The Atlantis's $20m inauguration celebration, where the world's A-list celebrities were treated to 1.7 tonnes of lobster and 1,000 bottles of Veuve Clicquot, was promoted as the world's biggest party.

For Palm residents, it was followed by an equally impressive hangover. The value of their villas and apartments on the Palm fell by as much as 60% in just a few months.

"Drink your last cocktail and get out of here," said Sasha Reynolds, a 33-year-old airhostess. "My boyfriend is an engineer and work has dried up. He's been offered work in Qatar but who wants to go there? People are still making money here but the parties aren't quite the same. I'm lucky ‑ I didn't buy."

The exact number of unemployed is not known. The Dubai government does not release figures, and prevents the press from running stories that damage the economy, such as mass redundancies.

But there were sacked expatriates ‑ bankers, lawyers and architects ‑ in all but one of the hotel bars visited in Dubai this week.

Employees who lose work in the UAE automatically have their visa rescinded, generally giving them 30 days to leave.

"I look out of my balcony every day and I see Brits by the pool on their laptops," said Andrew Hillocks, 29, a sacked telecoms consultant whose passport has been seized. He will be escorted to the airport next week. "They're looking for work that just isn't there. I sold my car to cover my loan, but other people are panicking."

Under Dubai's strict legal code defaulting on debt or bouncing a cheque is punishable with jail. Any expatriate in financial difficulty knows the safest bet is to take the next outbound flight.

At the airport, hundreds of cars have apparently been abandoned in recent weeks. Keys are left in the ignition and maxed out credit cards and apology letters in the glove box.

Officials put the number of vehicles at 11. "No one believes that. There are 11 cars abandoned just on my street," said Anne, 26, a fashion editor from London. "Over the past two months I've been getting an email a day from people trying to sell their stuff. 'New Jaguar – need to sell before the end of the week'."

In a world of self-made millionaires and property entrepreneurs, some remain bullish. Simon Murphy, 42, runs the exclusive Crest of Dubai social club for Palm residents. "My job is to keep people smiling," he said.

The former hedge fund adviser's apartment is a "boy's paradise". Beside the snooker table and darts board are photos of him beside Richard Branson, Alan Shearer and Pele.

"I have the beach there. My local is that bar a couple of yards away. That's the pier where they're going to dock the QE2. People ask about the whole 'living the dream' scenario? Ain't this it?"

Some people had to lose out, he said. "As they say: eagles fly with eagles. The motivating factor to come here is greed. You have to be selfish, have minimal social responsibility, and want to make money quick. Brits in Dubai are gamblers. It's the nature of the beast that not everyone wins."

The invisible losers

In the Dubai however, the losers are the invisible majority.

Taxi drivers from Egypt, Yemen and Iraq compete for work. Their clients often ask to go to hotel bars where, at night, they will find prostitutes from Eastern Europe, Africa and Asia.

Expatriates from the developing world maintained Dubai's orgy of consumption during the boom years. Now they too are being forced to leave.

Perhaps those who suffer most are the construction workers from the Indian subcontinent, who have worked on perilous building sites earning as little as £70 a month.

The Indian embassy is reportedly anticipating an exodus with 20,000 seats on flights to India already "bulk-booked" for next month.

Buses come to pick up 250 workers every night from one dusty street on the edge of Sonapur, a labour camp on the edge of the desert.

As night falls, the gangly silhouettes of construction workers file out of the camp gates. "There is no work," said Jasvinder Singh, 24, placing his suitcase in a pick-up truck, the words "Dubai to Delhi" taped to the side.

"It has been such a drama. We came here to earn money. We are going home to see our wives but our pockets are empty."

Sanjit, 44, another construction worker from Punjab, gestures angrily in the air: "We were treated badly here. We were slaves to the Arabs."

But unlike their British counterparts, construction workers from India, Bangladesh and Pakistan cannot abandon lives in the glove compartment of a 4x4. Most took loans to pay agent fees to come to Dubai, and their debts will follow them home.

"I sold our land and took loans in the village to come here," said Imran Hassan, a 20-year-old Bangladeshi farmer. "I paid the agent £2,000 to bring me. He said I would earn 1,500 dirham [£287] a month, but we are paid 572 dirham. When I return people in the village will want their money but I have none."

A Welsh construction site manager said he had protested to his boss about the treatment of labourers.

"We tell them to bring their clothes to work one day and then we send them home. It makes me feel sick. I asked why it had to be done so quickly and I was told a lot of them commit suicide and we don't want that on our hands."

Tale of two cities

Dubai's future will actually be decided well way from the shimmering skyscrapers.

To find out why, you need to drive along 90 miles south along the Gulf coastline, past tiny Bedouin enclaves and shimmering desert mosques.

Abu Dhabi, the oil-rich capital of the UAE and the richest emirate, has opted for a more conservative – and, some say – prudent approach to growth that contrasts with Dubai's giddy expansion.

But it boasts 95% of the UAE's oil reserves and more than half of its GDP, and regional experts predict it will overtake Dubai as the destination of choice for westerners in the Middle East.

Dubai, which has barely a trickle of oil in comparison, is projecting a 42% increase in public spending on infrastructure projects, to compensate for vanishing private investment. But it cannot go it alone. Abu Dhabi is increasingly expected to bail out its poorer neighbour, and the two ruling families are meeting regularly to decide how to transfer cash into Dubai's ailing economy.

"The question is not if Abu Dhabi will come to the rescue, but how big it will be and how public," a source with knowledge of the negotiations said. "Abu Dhabi cannot let Dubai sink."

But Abu Dhabi has its own problems. The emirate's sovereign wealth fund – once said to be worth $1 trillion – has taken a hit in the global recession, while the lifeblood of the economy – the price of oil – is down more than 60%.

Thirty miles from the capital, dust rises from the barren horizon where a 10km-long building site is being turned into al-Raha Beach, an $18bn waterfront city, a joint venture between Aldar, Abu Dhabi's largest property developer, and Laing O'Rourke, the UK's largest construction company.

"A lot of staff have been moved over here from Dubai," said Paul, 35, a Laing O'Rourke project manager, raising his voice over the noise of JCBs.

"But it is all coming to a stop here too. There are mass redundancies now. We've gone from an expat workforce of about 1,000 to about 400. There are more waves of redundancies coming this week."

He said he could not be sure, but by his estimate more than half of the al-Raha development had been quietly shelved.

"I've not been made redundant myself but I've decided to go home in April. The wife and kids have already left. A lot of people are jumping ship beforethere are no lifeboats left."

Back in Dubai the following day, a Mercedes Benz snaked along the city's main street, Sheikh Zayed Road. A 35-year-old Emirati property magnate dressed in traditional Arabic clothing sat in the driver's seat, listening as Veronica Chapman, 65, a real estate agent from Hull, recalled what the city was like when she first arrived in 1980.

"No milk, no bread, no schools. It was a desert and a couple of buildings," she said.

The developer slowed the car to point out abandoned building sites where cranes stood still in the baking heat. "Here we are completely reliant on foreigners," he said. "Maybe Dubai grew too fast."

Compiled by

Deepak Melwyn MACHADO

PIERCE MORGAN ON DUBAI

2009-02-19T06:36:00.000-08:00

I was flying up the side of the world's tallest building in a small steel cage and made the mistake of peering down.

There, below me, was Dubai. Only it was disappearing fast. Very, very fast. So fast, in fact, that I began to feel distinctly nauseous.

I've worked in Canary Wharf, so I know about heights. But nothing quite prepares you for the Burj Dubai, an astonishing needle-like edifice that reaches, almost literally, to the stars.

t is already 2,559ft high, thus dwarfing the previous highest buildings - the KVLY-TV mast in North Dakota (2,060ft) and the Taipei 101 in Taiwan (1,667ft). And to give you some idea of scale, Canary Wharf is 'just' 800ft tall.

But here's the scary thing: the Burj Dubai is still growing and nobody is saying just how big it will be when construction, being carried out by a vast army of 8,500 workers, finally stops in September.

The Burj Dubai - which, incidentally, will have the world's fastest elevator, going up and down at 59ft per second - is the perfect illustration of what Dubai is all about. It's bigger, sleeker, glitzier and more imposing than anything else like it on Earth.

I spent two weeks in Dubai making a documentary for ITV1 - it will be broadcast this Thursday at 9pm - and I came away reeling.

Just two decades ago, this place was a glorified fishing village, a handy port for shipping tycoons to park their boats. Today it is one of the most dynamic cities on the planet, a pulsating emporium of wealth, success and ambition.

To put that timescale in perspective, it took 2,000 years to build London, 200 years to build New York and just 20 years to build Dubai.

Everything about it is jaw-dropping.

Next to the Burj Dubai lies the new £15billion Dubai Mall. It is the biggest shopping mall in the world, four times the size of the new Westfield Centre in London. Sprawling out over 12million sq ft - equivalent in size to 50 football pitches - it sells just about everything you could possibly want to buy.

As I wandered around its 1,200 shops, including Hamleys, Harvey Nichols, Debenhams and Marks & Spencer, I chuckled at the sheer mind-boggling excessiveness of it all.

The Dubai Mall also includes the world's biggest gold souk, with 220 retailers; an 850,000 sq ft Fashion Catwalk Atrium; a 22-screen Cineplex; an 80,000 sq ft children's entertainment centre called KidZania; and 160 food outlets. There are 14,000 parking spaces, a 250-room luxury Armani hotel, a SEGA theme park, an aquarium and an ice rink.

To try to come to terms with what I had seen, I lunched at the famous sail-shaped Burj Al Arab hotel, reputed to be (naturally) the best in the world. Suites cost up to £14,000 a night, but even the smallest are so opulent that they have their own spa and butler, and occupants get use of one of the hotel's 16 courtesy white Rolls-Royces.

I toured one of the larger suites - a gold-encrusted, marble-floored mini-mansion. It had a fully stocked bar, sunken Jacuzzis, an office with all the latest high-tech gadgetry, giant plasma TVs, mirror-roofed four-poster beds (I particularly liked those as they would enable me to go to bed staring at myself) and stunning views of the city.

In the hotel bar I was offered 'the world's most expensive cocktail', based around a rare 55-year-old Macallan single malt whisky. It costs more than £5,000 but eight have been bought in the past year.

And in an effort to 'fit in', I departed from the Burj Al Arab in a helicopter, which took off from the hotel's own helipad.

If you think that's over the top, then think again. I spent one bizarre morning examining plans for Dubailand, the self-styled 'world's greatest theme park'. Not for the first time in Dubai, the claim seems justified.

It is being built on a 107-square mile plot of land that is bigger than Birmingham.

When finished it will include lifesize replicas of the Taj Mahal, Empire State Building, Eiffel Tower, Big Ben and Houses of Parliament, and a version of the Las Vegas strip that will be four times as big as the real thing.

There will also be Tiger Woods-designed golf courses, a Formula 1 race track, palatial hotels and villas and water parks.

The architect's model that I saw (which itself occupied a room the size of a small aircraft hangar) almost defied belief, like so much of Dubai. But it's happening and, despite the current financial turmoil, it is expected to be finished on time next year.

Everything here gets built ridiculously fast, yet also extremely well. It's mainly because the construction managers are predominantly British, all experts in their field.

The man behind all this is Sheik Mohammed Bin Rashid Al Maktoum, the ruler of Dubai and a man with an estimated wealth of £15billion. He's an extraordinary character, someone for whom the word 'visionary' could have been invented.

It was he who commanded, apparently on a whim, that the Burj Al Arab be built out to sea - a decision that instantly doubled the cost but also made it one of the great new landmarks of the world.

And it was he who made the same dramatic intervention with the Burj Dubai, as I discovered from his right-hand man, Mohammed Ali Alabbar.

'Sheik Mohammed is a very brave man with a very positive mind,' he said. 'I have been with him 15 years and there are times that his energy is so unbelievable and his vision unbelievable.

'The first design for this building was 90 storeys, and my meeting with the Sheik lasted one minute. He said, "No." I said, "OK." So I went back to him later and said, "One hundred and twenty storeys," and he said, "Listen, don't come again."

'So next time, I brought a chart of all the tallest buildings in the world and I put in the revised plans for this building. He said, "OK, how much taller is that than the current tallest building?" I said, "About 40 per cent," and he said, "Good, you go."

'And what we will end up with is a symbol for all Arabs that shows we want to be part of tomorrow's world.'

That one anecdote tells you all you need to know about Sheik Mohammed. He has no desire to make Dubai just another city. He wants it to be the biggest, wealthiest, most vibrant, creative and exciting city in the world.

The incentive that drives everyone in that process of creating the modern-day Utopia is two-fold - pleasing the ruler and making a ton of money in the process.

The rich in Dubai are staggeringly rich. Take Dr Sulaiman Al Fahim, a property executive who fronted the Abu Dhabi ruling family's recent purchase of Manchester City Football Club. A billionaire before his 30th birthday, he is the local Alan Sugar, starring in an Apprentice-style show with his own catchphrase: 'Impress me!'

I flew around Dubai in his private jet and he outlined the ethos of the place to me.

'Sheik Mohammed wanted to build a business and tourism hub where East and West could meet in one place. What you see is one man's vision. And he has much greater plans for the future. He wants us to be number one.'

'How much money is there down there?' I asked.

'The last estimate was £300billion,' he replied nonchalantly. And much of it is committed to the kind of madcap schemes that would get nowhere with most of Britain's planners.

'Here,' said Dr Sulaiman, 'you can have a crazy idea and the government will be very supportive so long as it is exciting and bold enough that it will make a statement to the world about Dubai.

'That's why we all come up with ideas that seem impossible to everyone outside Dubai. Here, the crazier the better!'

Dubai is an extraordinarily diverse, multicultural place, where scores of different nationalities cohabit peacefully.

'You have Muslims, Jews, Buddhists, Christians - anyone and everyone is here,' said Dr Sulaiman. 'Our culture is very flexible with other cultures.

'If you come here you will never get asked what your religion is or where you come from. Nobody cares about those things. We just want to know what ideas you have to improve Dubai, and we expect you to respect our culture.'

When we landed, Dr Sulaiman whisked me through the city in his white Versace-designed Lamborghini Murcielago, the only one of its type in the world. The car cost £300,000, the Versace decor £500,000.

'Was it worth it?' I asked. 'Oh yes,' he chuckled. 'I was offered £1million for it yesterday - everyone in Dubai wants one because they are so rare.'

The biggest boom in this Middle Eastern gold-rush has been in property. If you had invested in a home five years ago, you would have easily trebled your money by now.

One Chelsea footballer, who paid £400,000 five years ago for a place on the fabled Palm Jumeirah, a series of artificial islands shaped like palm trees sprouting out from the coastline, sold it last November for £3.5million. A staggering £3.1million profit on a place he never set foot in.

Many of the England team who trained here before the 2002 World Cup also bought pads on the Palm, and are therefore sitting on vast profits, though admittedly slightly less vast since the credit crunch bit hard.

The Palm is just the hors d'oeuvres though. The main course is The World. You've probably heard of it and got a picture in your head, as I had, of a few small islands named after countries. But the reality is so much more fantastical.

There are 300 islands in total in The World, all four miles out to sea. And not one of them existed ten years ago. Sheik Mohammed simply approved a plan to redistribute 320 million cubic metres of sand from the seabed and, bingo! there was a whole new world.

I went out there in a boat and could scarcely believe the dimensions of the thing. I also stumbled across a bit of a scoop.

England, a much-prized country in the new development, has, as The Mail on Sunday reported last week, been bought by two Londoners - Safi Qurashi and Mustapha Nagri.

Safi, who was born and bred in Balham, South London, left Britain four years ago, having lost everything in a failed internet company. Now, thanks to a series of shrewd property deals, he is in a position to pay £43million for what amounts to a lot of sand in the middle of nowhere.

And, even more inexplicably, you might think, his England is flanked by Germany and France.

But Safi plans building 100 luxury villas on the island, all with a 'very English feel to them', which he believes could eventually generate tens of millions of pounds in profit.

I asked him what his idea of the 'Dubai Dream' was. 'The Dubai Dream is that if you work hard and have belief, then you can pretty much achieve what you want. Isn't that what all dreams are about?' he replied.

'And this particular dream,' I suggested, 'has the added benefit of existing in a tax-free environment, with 360 days of sunshine a year, virtually no crime, and a government that lets you do what you like so long as it embodies the spirit of the Ruler?'

Safi smiled. 'You could sum it up like that, yes.'

There are, as with all paradisial dreams, a few uncomfortable realities. Dubai is very tough on crime and adheres strictly to sharia law.

Drugs are a complete no-no. One foreigner was jailed recently for four years after he was found with a quantity of cannabis in the sole of his shoe smaller than a grain of sugar.

It's illegal to be gay in Dubai, to kiss in public, or to share a flat with your girlfriend.

Sex is a bit of a moral maze, to be honest. The place is crawling with prostitutes: you see them lining up at the hotel bars, passports in hand (they're not allowed in without one), touting their wares without any sign of the authorities trying to stop them.

But try to have a bit of nookie on the beach, as one British couple notoriously attempted last summer, and you will be deported if you're lucky, and jailed if you are not.

If you have a fight in the street, you could get two years in prison. Even Harry Potter books were temporarily banned in schools due to Dubai's strict anti-witchcraft laws.

Strict media censorship also undoubtedly exists, though it is slowly being relaxed, and one heavily critical word spoken publicly about the ruling family can lead to a swift one-way ticket home.

If it all sounds pretty draconian, then that's exactly how Dubai's rulers mean it to sound. But from my experience, everyone not only accepts the rules, they actively approve of them.

Virtually every Briton I met waxed lyrical about the safety aspect of living in Dubai - how they can leave their houses and cars unlocked, how they can walk the streets at night laden with jewellery and not worry about being mugged, and why they never have to fear being beaten up by some drunken yob.

And none of them had any sympathy for the sex-on-the-beach duo.

'They knew the rules,' explained one banker. 'What they did was stupid and insulting. They were even warned first, for God's sake, which is unusual out here.'

One of the more extraordinary people I met was a British woman called Amal. She used to be called Debbie, an IT consultant from Yeovil, but she came out to Dubai a few years ago, married a local man called Mohammed and became a Muslim.

I asked her why she had embraced the culture so fervently.

'I kept coming out here for about ten years or so, and each time I went back to the UK my heart sank a bit more. I watched our country go down the tubes, with more and more crime, binge-drinking, drug abuse, teenage pregnancies, pornography everywhere, and I watched respect crumbling for parents, teachers, authority and religion.

'People would rather be at home watching TV than going to church, and as a religious person I found that very depressing.

'Dubai is a safer society where people abide by the rules. There's also just more respect generally for other people and other cultures. When I was back in Yeovil recently, I was spat at in the street for wearing my burka. No Arab here would ever treat a foreigner that way for the clothes they were wearing.'

As for the common perception that women are a downtrodden species in places such as Dubai, Amal laughed. 'Look, a lot of that is overstated. An Arab man will definitely do things like open a door for a woman and Mohammed treats me with great respect, I can assure you.'

I'm sure many will feel Amal had perhaps been a little brainwashed into viewing Western culture as an evil blight. Indeed, she has been virtually disowned by many of her family who believe that this is the case. But I found myself agreeing with at least some of her observations.

There's no doubt a lot of Britons come to a place such as Dubai because they are fed up with the increasing lawlessness and undercurrent of violence on the streets back home. I met a wealthy local businessman called Michele who smiled when I asked him if Dubai's rules were too strict.

'Look, every country has its laws. Arabs find some of Britain's laws very strange. As we understand it, if someone breaks into your house, you can't touch that person unless he or she does physical harm to you?' I nodded.

'Well, excuse me!' he exclaimed, 'Here, I will defend myself in my own home and the law will protect me!'

'With a sword?' I joked. 'Possibly,' he replied in all seriousness. 'But more likely with a cane or something.

'I'm not advocating a stoning or beheading or any of those things British people assume we like here. But a mild beating of someone invading my house would be allowed.'

When I asked Michele why nobody mentions the credit crunch in Dubai he smiled again. 'It is a very Arab thing to not talk about it. We have a feeling that if you talk about these things then they will definitely happen, and be worse than we feared.

'We don't call cancer "cancer" for instance, we call it a disease that can't be mentioned. So we all pretend it's not going on because we all fear being the messenger of doom, but I can tell you that the crunch is definitely here, and it will have an effect. Not a disastrous effect, more of a correction back to sensible, less crazy levels.'

But expats in Dubai still have a lot of fun. There are hundreds of bars, clubs and restaurants that hum every night with Western-style decadence.

Dubai knows it needs to create a post-oil tourism playground and to achieve that it has to be tolerant of the way Britons and other visitors let their hair down.

You can drink alcohol, so long as you do so in moderation, and you can party to your heart's content - you just have to behave yourself. And what's so wrong with that exactly?

I'm not advocating sharia law to curb our worst excesses, but a slightly heavier hand wouldn't do any harm, would it? We do, after all, have the worst rates of teenage drug abuse, binge-drinking, pregnancy, obesity and yobbery in Europe.

Dubai is not perfect - far from it. Apart from anything else it is currently one gigantic building site.

Sheik Mohammed has ordered that the main phase of construction be completed by 2014, hence the obsessive 24-hour battle to get everything done on time. This makes it noisy, dusty and very difficult to get around. Traffic is a nightmare.

There's no doubt, too, that slave labour has been an enduring issue here. Tens of thousands of workers, mainly from India, Pakistan and China, get paid less than £200 a month and live in camps that could best be described as very basic.

A significant number of them die or get seriously hurt during construction, too, though the exact numbers are kept secret by the authorities.

But after all this was exposed by the Western media several years ago, Sheik Mohammed took action.

There is now a hotline for any workers to call if they have complaints about their working or living conditions. From what I could deduce, these complaints are usually acted upon.

The few workers I talked to (most don't speak English) seemed happy enough with their lot, pointing out that they earn a lot more than they could earn back home. They are also here voluntarily - nobody holds a gun to their head and forces them to come to Dubai.

So while I think the 'slave' labour issue remains a pretty unsavoury aspect to the establishment of the glittering Dubai Dream, I don't believe it is any longer the great unspoken evil it once was.

On balance, I would say Dubai is a pretty good place to live. But if you're thinking of relocating here, a word of warning.

I spent a very entertaining afternoon with Patty Parfitt, ex-wife of Status Quo rocker Rick. She rents a perfectly nice three-bedroom house which cost her £37,000 last year, but her landlord has just increased the rent by nearly 50 per cent. 'It's very expensive here,' she told me, 'much more than I think people realise.'

With the local currency pegged to the US dollar, basic living costs have also rocketed for Britons in the past six months as the pound has fallen in value.

As for Dubai itself, it is now facing its greatest challenge. It has only a few more years of oil left, although its neighbour Abu Dhabi has a lot more and will continue to bail it out if need be, as it has in the past.

The global credit crunch is also clearly going to have a significant slowdown effect on the country's astonishing development.

But if I was going to back one man to guide it out of this semi-crisis, then it would be Sheik Mohammed. The man who wakes up most mornings and thinks: 'What ridiculous, breathtaking, world-beating feat of engineering and construction shall I sanction today?'

If there was any doubt about how Dubai would react to the financial crisis, the world was given a stunning reminder of its extravagant wealth with the recent launch of the Atlantis Hotel.

Stars including Robert De Niro, Denzel Washington and Sir Richard Branson flocked to the glittering opening night, where the only question was what cost more millions: the champagne that flowed for 2,000 guests, the fee for Kylie Minogue's performance or the 'world's greatest fireworks display' that erupted at midnight.

It sent a firm message to the rest of the world: we're doing just fine, thanks very much.

For my part, I reckon Dubai will be great - when it's finished!

Germaine Greer on DUBAI

2009-02-19T06:25:00.000-08:00

The below article appeared on Guardian UK. I do not approve of this. But this makes a good reading.

From its artificial islands to its boring new skycraper, Dubai's architecture is beyond crass by Germaine Greer.

If Monaco is, in Jack Nicholson's phrase, Alcatraz for the rich, what shall we make of Dubai? Dubai is a city built between the desert and the pale blue sea, that uses more water per capita than anywhere else in the world, and derives 97% of it from desalination, which means that it is the most expensive water in the world. Much of that water is being used to create a garden in the desert. All across the sprawling conurbation, labourers can be seen planting out millions, possibly billions, of bedding plants, into sand banks perpetually moistened by drip irrigation. Dubai has been built on the premise that nothing succeeds like excess.

After years of popping in and out of Dubai airport on my way to and from Australia, this time I deliberately managed my travel itinerary so that I had a long layover, four hours of which I spent on the open top of a double-decker bus that wandered from Deira City Centre through the Wafi Mall, round the World Trade Centre, down to the Jumeira Beach Road and past Dubai World, before doubling back past the Mall of the Emirates and downtown Dubai.

Only 6% of Dubai's revenue comes from oil; the city makes most of its money out of inventing, creating, building and trading real estate. Hence Sheikh Mohammed bin Rashid Al Maktoum's hubristic notion of building an archipelago out of sand dredged from the Persian Gulf, 300 islets arranged in a resemblance of the world map, and calling it Dubai World. Thousands of workers trucked in from poor countries constructed the patches of exposed sand, and the infrastructure that furnishes each with water and power. The islets have since sold for anything between US$15m and $250m apiece. It seems doubtful now that the countries and corporations that have bought into the scheme will have the resources to develop their patches of sand into themed resorts, which might be as well. We can only hope that the Irish company Larionovo, owners of the Ireland islet, never get to build their planned replica of the Giants' Causeway.

What I particularly wanted to see was the tallest building in the world, Burj Dubai, which topped out at 2,684ft on 17 January. As the bus trundled past, I hung out from under the sun canopy, peering up at this needle stuck in the buttock of the Almighty, and I noticed with a thrill of something like terror that there were cranes still working on the top of it, half a mile up in the air, supposing there was any air up there. Burj Dubai was originally meant to be entirely residential; when I saw it, it was entirely empty. The Armani residences are apparently selling at US$3,500 per sq ft and office space for rather more, but I had an eerie feeling no one would ever live there. Soaring up from that tongue of sand, with the Empty Quarter stretching away to the south, Burj Dubai seemed outrageously megalomaniacal, and defiantly worldly, a new Tower of Babel. The developer, Emaar, has lost 75% of its value on the Dubai stock exchange.

While Burj Dubai is a pretty conservative building, Burj al Arab, the huge sail-like luxury hotel built on the lines of an Arab dhow, is entirely innovative. The structure hangs from a steel exoskeleton. From the outside it is unbelievably elegant, light and clean (the interior is anything but). In afterthought, the reference to the tiny dhow seems somehow mocking. The only dhows on Dubai Creek these days take tourists on one-hour pleasure cruises. Though in Dubai you are surrounded by the poor, who labour on every building site, clean the streets and the houses, and wait on the children, they are as invisible as the plumbing. Here, there is no subsistence; here there is only shopping.

Crassest of all the real estate initiatives are the three Palms, off-shore developments of 16 branches emerging from a central trunk, enclosed within a circular breakwater, each intended to house hotels, villas, apartments, marinas, theme parks, sports facilities, and malls. At Palm Jumeira, still largely undeveloped, the water between the branches is stagnating and algae is forming along the man-made beachfront. How this will affect the dolphins that are shipped from the South Pacific to amuse the guests at the Hotel Atlantis, who pay $75 to swim with them, is anybody's guess.

In December, Nakheel, developer of the Palms, cut 15% of its workforce. Dubai's stock market has lost 70% of its value. Half of the 100 Dubai estate agents interviewed for the Christian Science Monitor in December said they had not sold a property in the previous month. Some of the unfinished buildings I saw will never be finished. Many should never have been started. For all its extravagant novelties and its masses of petunias, Dubai is a city with neither charm nor character.