Wednesday, December 03, 2008

Upside of the downturn

I'm not minimising the individual problems caused by the economic meltdown such as people losing their jobs, with all the ramifications of that. But for now concentrating on the bigger picture, there is a huge upside to the downturn as far as Dubai is concerned.

It means a slowing down of the frantic growth, so much of it with apparently no integrated plan and far too many individual projects with no apparent planning.

The economic crisis is a blessing in disguise. It brings time to take stock. To consolidate. To plan.

It means that maybe some of the vital infrastructure - sewage treatment plants, water, public transport, police, fire brigade, health care, laws even - can catch up with the growth in size and population.

Dubai will be the same as the rest of the world. Badly run companies will go to the wall. Cowboys, in all industries, will go. Overstaffed companies will get sensible about staffing levels. Banks will do credit checks and demand sensible downpayments. Businesses will be, will have to be, run in a businesslike way.

All of that is good news.

The economic world needs this kind of shock every so often. It's like bushfires, they're needed to clear the deadwood, to allow regeneration. That this is worse than almost all preceeding economic slumps simply mirrors the fact that what lead to it was worse than we've seen before.

Human nature left to its own resources with checks and balances removed. People trusted to do the right thing. What naivete.

Naturally and inevitably personal greed, short term thinking, irresponsibility took control. To the point that the deadwood was choking the healthy.

So we have an economic bushfire. It was inevitable.

Doubt is now being expressed over Dubai's target of 15 million tourists by 2015, with the huge ramifications that brings.

Developments in Dubai are being scaled back, postponed or cancelled.

Looking just at Nakheel, they have announced that the master plan of the multi-billion dollar Jumeirah Garden City, what is currently my favourite old Satwa, is being "revisited and pockets of the development are delayed".

On Palm Jumeirah, Frond N villas, Gateway Towers and Trump International Hotel & Tower have all been delayed. Their recently announced kilometre-high tower is now on hold and work on The Universe will be restricted to preliminary engineering studies. The Universe is the vast offshore development planned along much of the coastline.

Nakheel is far from being alone in this scaling back of projects. For example, Limitless said of its Arabian Canal mega-project that it is "reviewing the pace of development in response to market conditions."

Have no doubt that we'll be seeing many more announcements of slowdowns, postponements, cancellations in the coming weeks and months. From the major Master Developers and from small individual developers.

And for Dubai that's the positive side of the economic crisis. Time to think, to re-think. We can hope there's enough time for better planning too.

I don't doubt that the projects will go ahead in the longer term, although there may well be changes from the original announcements. But the slowdown does offer the chance to get them right, to phase in all the facets of the growth sensibly.

Nakheel info is here.

Limitless info is here.

Tourism outlook is here.


Umar in Dubai said...

couldn't agree with you more. It really is a blessing in disguise, but many don't realize it right now.

Seabee said...

I do feel sorry for the innocent people caught up in it who lose their jobs and I don't mean to minimise that. They won't agree with me of course and I can understand that.

Dave said...

Dubai was like a tornado spiralling out of control & being fueled by greed.

Ultimately this city will be a better place as reality sets in and decisions are made at a more realistic pace and with greater rationale.

I am sure that there are some that won't see it that way at present....

rosh said...

"Human nature left to its own resources with checks and balances removed. People trusted to do the right thing. What naivete."

Well said Seabee!
In my opinion, this is what happens when you leave a 'Free Market' without sufficient checks and balances, because you shall have special interests take whatever they can get. Unfortunately, DXB/UAE has little regulation, mature legislation/laws to check greed & speculation.

Here in American given housing market "collapse", perhaps a big source of the problem that haunts us all now is that the Fed was basically GIVING money to lenders to lend at artificially low rates and that sent housing prices into hyperspace. Now, those institutions will not be repaying the money and we are all screwed --except, that is, for the big Wall Street boys who got theirs and ran. They will live lives as comfy gazillionairs, while most of the nation eats the economic losses. This is what you get for believing that unchecked capitalism is positive. Like everything, capitalism in general, and the Wall Street leaches in particular, need REAL controls - not custom-suited foxes running the hen house.

Seabee said...

Rosh I've been meaning to write one of my 'thinking out loud' posts on it for a while, I just haven't got around to it yet.

The form of capitalism popularised as Thatchernomics and Reaganomincs, and taken to further extremes under Bush W, cannot work for more than a short period any more than communism at the other extreme can.

Both extremes ignore human nature and as a result they inevitably fall apart.

There has to be a middle road with balance between freedom and control.

ZeTallGerman said...

Well said, seabee. I've been thinking the exact same... "Thank goodness they'll be FORCED to slow down."