Tuesday, November 03, 2009

Dubai's demise

Three things prompted this post, a conversation and two experiences.

The conversation was a visiting UK businessman saying the other evening that we in Dubai are unaware of the bad situation we're in. We're not exposed to the truth as presented by the press in the UK so we don't realise that the city's economy has collapsed.

Hmmm.

Firstly, we are of course fully aware of what the world's media says - we have access to it on the internet.

Secondly, while there's been a dramatic slowdow it's not the picture conjoured up by sections of the British press. You know the stories, tens of thousands of expats fleeing, schools emptying, a ghost town being reclaimed by the desert.

The two experiences were yesterday evening's peak time which gave us traffic gridlock on Sheikh Zayed Road, on Al Sufouh Road, in Knowledge Village.

Then walking the length of Dubai Marina I was struck by the huge amount of construction still going on. There's the constant noise of generators, machinery, hammering, shouting along the full length of the Marina.

An awful lot of companies are still doing an awful lot of business.

They jumped the gun with the obituaries.

15 comments:

AdelDu2 said...

Hi Seabee,

Having left Dubai in late May this year (after 15 months), I have continued to keep an eye on your blog (and others) from time to time to see what is happening. I find it great to read positive but also honest commentary about the place after having experienced so many of the things first hand that you write about.

However, during my time working in both finance and construction in Dubai, Sharjah, and Abu Dhabi, I also became informed and aware of many problems which Dubai (in particular) has suffered from as a consequence of the global financial crisis.

I, too, have read some of the negative press articles from the UK (and I am ashamed to say that a couple of these have been reprinted in totality in Australian newspapers and publications without any further verification).

Whilst I agree that in the main most of these articles have been written predominantly with a degree of sensationalism and horror in order to attract readers, there are nonetheless some home truths which I know to be accurate albeit depicted with some embellishment and/or exaggeration. Without wishing to detail these now (perhaps on another forum and another time), it needs to be said that whilst Dubai certainly is not going to regress to the point where no-one will be living there save for the local Emirati, there are still serious problems for those whom continue to live and work there, both financially and socially.

In my (humble) opinion, it remains to be seen whether Dubai can recover to a point of reasonable growth and long-term prosperity given its’ very heavy reliance on foreign investment for its’ development; local (royal family) funding; and its’ ability to continue to attract tourism dollars through its’ creation of various entertainment and holiday activities and attractions.

Seabee said...

I agree. I'd really only change one thing in what you've said:

"there are still serious problems for (SOME OF) those whom continue to live and work there, both financially and socially.

The vast majority are doing better than we were back home, wherever that may be. That's always been a strength of Dubai and will continue to be.

Like the rest of the world, although amplified because what was happening was so extraordinary, the unsustainable boom of the recent past was a blip.

Dubai always has been a trading, retail and business centre with the great advantage of location. It's had its ups and downs, like every other commercial centre - the death of the pearling industry was probably the first big hit and I well remember the recession in the early eighties when I know of hotels which had zero occupancy.

But these things are cyclical and the fundamentals are what matter.

Anonymous said...

What are your feelings about the White Collar crime being reported in the local papers and how much hasnt been mentioned in the press?

Secondly, do you think 3 Palms was a good idea when it only needed one to put us on the world map (again).

Things have been embellished in the foreign press....clubs still full, Barasti still has its queues. Traffic not gone anywhere....

Dubai Photo Story said...

To be fair, Dubai has been severely hit by the recent financial crisis. Due to the impact on liquidity and consequent impact of the real estate sector, there was a lot of panic. This had a cascading effect in many other areas as sentiment hit rock bottom. Having said that, the western press has been too quick in predicting doomsday.

My personal opinion is that once liquidity returns and sentiment improves (more difficult), this place will accelerate faster than most places.

Seabee said...

Anon@8.50:

"What are your feelings about the White Collar crime being reported in the local papers and how much hasnt been mentioned in the press?

White collar crime happens everywhere and with the vast amounts of money that were floating about here, and the lack of laws, it was inevitable that we'd see it too. The fact that the government is cracking down on it and the fact that it's being reported is all good news.

As so much is being reported, including that involving highly-placed individuals including a former minister, I see no reason for any to not be reported.

"Secondly, do you think 3 Palms was a good idea when it only needed one to put us on the world map (again)."

Nakheel in particular were breathtakingly stupid in trying to do so much, so many vast projects, at the same time. The three palms, The World, the Arabian Canal etc.

Adding to the stupidity was the speed with which they tried to finish the projects, especially when the engineering involved in so much of it was untried.They were already working on the other projects by the time they realised the problems they faced building Palm Jumeirah.

Anonymous said...

Dubai continues to suffer. The latest (unpublished) example of this is the Al Sufouh tram line which was scrapped last Thursday. The layoffs have commenced with over 3000 staff having been advised they will be made redundant in the forthcoming months.

Source, I hear you say.... straight from the horses mouth!!!

The unopened metro stations are also "on hold" until the contractor gets paid. They have been carrying the debt of the Dubai RTA since February this year.

The Emirate is broke and owes 48M Dirhams to existing contractors. The pain continues but the Dubai Govt has done well to share it with those companies unfortunately contracted to them.....

Anonymous said...

Seabee, Dubai's demise was exagerrated. At the same time, they are denying one of the biggest signs of financial problems, i.e. non-payment of bills to contractors

Funny how a person can go to jail for missing a loan payment, and yet contractors can be unpaid for months.....

Seabee said...

Anon@10.29, I agree, the non-payment of invoices is a huge problem, I've posted about the damage to Dubai's business reputation a number of times.

Equally appalling is the demand for a discount if the contractor wants the bills paid, up to 30% discount I've heard of.

It's not unique to Dubai, I've had the same kind of thing in business in the UK, Singapore, Oz in the past, but it's the amounts involved and the damage to the emirate's reputation that make it worse.

I agree with you about the jail thing. I've always believed that to order something and then not pay for it, or to demand a discount for payment having previously agreed the price, is nothing less than fraud and should be treated as such.

Anon@10.01, yes I've heard the same stories from people involved.

parakkav said...

Hi,
I think in Dubai, there is recession on one side and Boosting on the other. A Dragon IS in Town: it may catch someone but still Many are UNAFFECTED!
-Sadar
www.parakkav.blogspot.com

Anonymous said...

The latest (unpublished) example of this is the Al Sufouh tram line which was scrapped last Thursday.

they are still working on it today..

Seabee said...

Anon@3.18, I noticed a lot of workers toiling away on it at around nine this morning too. They seemed to be still digging too, not filling the holes in.

Dubai City Information said...

this is just the start my friends. unfortunately dubai's fundamentals are too weak for a self sustaining recovery. it relies on outside capital too much. but, watch out for abu dhabi next door.

Seabee said...

DCI I have to disagree. Dubai's fundamentals which you say are weak are actually strong because they are that it has from its very beginning been a commercial and retail centre with location as a key advantage. The last few years (like in so much of the world) have been an anomaly.

Doug said...

The latest (unpublished) example of this is the Al Sufouh tram line which was scrapped last Thursday.

This is not true, apparently - straight from the horse's mouth.

Seabee said...

Doug, yes, in spite of the rumours the work seems to be continuing as normal.