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The Death of Development, Part I
Dubai master-developer Nakheel, which aimed for the stars with iconic projects, prepares for a dramatic restructuring, reports Trends. Part I.
January 11, 2010 1:08 by Edmund Sheen
“Who throws a $13 million party and then fires hundreds of people?” asks one miffed executive who jumped ship after he sensed trouble at Nakheel.
His sentiments appear to echo many investors, stakeholders and bystanders who watched the fireworks with amazement on Nov. 20 and then had to digest the news of the first wave of lay-offs on Dec. 3.
December of last year was when stories of Nakheel’s woes began to surface. Even a cursory investigation confirmed that the company was in serious trouble.
There are different interpretations of what actually transpired during those turbulent days. But almost everyone TRENDS spoke to blames lack of management, a cash-splurging habit, ill-advised project timings, corruption and wavering focus as the core reasons for the company’s troubles.
Just last month, the ruler of Dubai fired the governor of the Dubai International Financial Center, Omar Bin Sulaiman, in a shake-up of the emirate’s management. The move is part of an overall reorganization of Dubai’s leading investment and property entities that finds Nakheel next on the sheikh’s to-do list.
Nakheel’s days of operating in a silo, seemingly immune to the demands of risk management and corporate accountability, appear to be numbered.
For example, the former executive of an Abu Dhabi developer, who chooses to call himself a “bystander,” says his company always regarded Nakheel as a “big company with big ambitions” until it started to face problems.
Most sources say that Nakheel simply failed to put in place the systems and processes needed to run a corporation of this magnitude during its growth phase. As a result, when things began to get worse, a kind of panic set in that lead to indiscriminate firing, even of operationally critical people. The timing couldn’t have been worse because it coincided with a global financial crunch that triggered a slump in the UAE’s construction sector.