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Is Dubai fixed?

Is Dubai fixed?

According to Sheikh Mohammed, after the rigors of the financial downturn, Dubai is back. Kipp asked if you agree.

October 12, 2010 1:41 by

Is Dubai really recovered? Or are we just hoping the power of positive thinking will make it so? Those were Kipp’s sentiments a couple of weeks ago when Sheikh Mohammed bin Rashid Al Maktoum announced to the world in a Bloomberg interview that Dubai was back.

“We are back,” he said in the interview. “Of course we are back. This is a challenge. Life would be boring if there’s no challenge.”

The leader of the emirate and the Prime Minister and Vice-President of the UAE was speaking a few weeks after a majority of creditors accepted a debt deal from Dubai World, the indebted mega-holding company encompassing Nakheel, DP World, and Istithmar World, to name just a few. The debt deal calmed the nerves of creditors and investors, and regional markets have seen both stability and confidence return in varying degrees since.

In his interview Dubai’s ruler also said that all projects “that were there are going ahead,” but that some may face delays.

In last week’s poll, Kipp asked: Do you agree with Sheikh Mohammed? And the results are in. They show that just under a fifth of Kipp readers (18 percent) think Dubai is recovered, while two-fifths (40 percent) think it’s still in trouble. The largest group is bravely sitting on the fence: the remaining 42 percent say it is too early to tell.

For our money, Kipp thinks they are probably right – it is a bit early to say we’re in the clear. And, in fairness, Sheikh Mohammed hasn’t denied that hard work remains ahead for the emirate and the country. At the recent Cityscape Global event, he further qualified his belief in the UAE, emphasizing that the people of the UAE are hard working and capable of overcoming challenges no matter how big they are, according to a WAM report. But in his statement he also said that the economic situation is gradually improving and things are returning to normal. So we’re not all the way back yet.

[It’s worth saying that “normal” for Dubai is very different to everywhere else. Here’s hoping that rather than Dubai normal, we can establish a calmer, common-sense based business environment in a more considerate, rational place to live.]

As for the recovery, some media outlets believe it’s well under way: Emirates 24-7 reported this week that four sectors have offset the damage suffered by the economy in the financial crisis, and are poised to lead us into a more prosperous age. Industrial, banking, insurance and retail have all managed to take positive lessons from the recession, according to the paper, which spoke to key players in each field.

All this positive talk is not exactly paying the rent, but given the gloom of the last year or two, we’ll take it for now.

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  1. True on October 12, 2010 4:49 pm

    Dubai economy is in a slump…i had been Dubai for 1 year….but i could not find a job….horrible…
    I am in my country right now and I dont like go there.
    my friend who lives in Dubai would like move to another country.

  2. Miss Anne Thropic on October 14, 2010 8:28 am

    “Life would be boring if there’s no challenge.”

    Tell that to the people who have lost their jobs, businesses gone bust, stranded labourers…

  3. Ian Ohan on November 1, 2010 6:29 am

    It is important to revisit and recognize what has been achieved in Dubai during the past decade. World-class infrastructure, global tourism hub with dominant international airline, massive real estate investment and development, diversification of industry and the list goes on. The government’s vision and drive is responsible for this. The primary pivotal factor in the economy could be linked to the regulatory and corporate governance related environment that lagged the massive growth. This would not have prevented a crash, because let’s remember we are in a global recession with few countries untouched – but would have eased the pain.

    Dubai’s debt at anywhere between $100bn and $150bn is large relative to GDP, however relatively small by comparison to other countries. The American government poured over $200bn into a a single company – AIG, by way of comparison. I would also argue that most countries do not have the resources and regional presence and dominance that Dubai has developed during the past decades.

    Irrespective of Dubai’s share of the UAE’s oil resources, it has very oil rich neighbours that do not yet have the level of infrastructure and quality of life offered in Dubai and now at more affordable prices.

    Dubai still has the overhang of an over-leveraged and disproportionate real estate industry, that will not be resolved for many years, however is a double edged sword in that as prices fall, it arguably makes Dubai a more attractive destination and contributes to its value proposition to businesses and individuals.

    We are now suffering the deleveraging of Dubai’s economy from real estate that I would argue is the primary sector in which jobs were shed in 2009.

    All indications suggest that there is still more pain to come with respect to the financial sector and the real estate sector, however problems are being resolved and I suspect at faster rates than in Western economies simply because the government has the ability to unilaterally force solutions that might take years in other countries.

    Tourism spend is also on the upswing and contributing to Dubai’s recovery and I am seeing an improvement in business sentiment across sectors in Dubai.

    Dubai’s economy crashed harder and faster than most economies in the world and later in the cycle. The flip side might be that it may also have a strong resurgence when the global economy begins to dig itself out. What I do know is that the leadership is determined, dynamic and driven and has too much at stake to fade.

    In short Dubai has a few weapons (a few more than most governments in western economies) in its arsenal to not only stabilize its economy in the short term but start to rebuild which is already happening.

    If Dubai can sort out and streamline its legal and regulatory frame work and make business more accessible, it will no doubt reinforce its leadership position regionally and take up an enviable position internationally.

    Is Dubai back? Let’s hope not – no economy can sustain the type of growth and expense we were experiencing in 2008/9.


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