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.

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.

Dubai's future clouded in debt?

Dubai is on a spending spree, and financial analysts are starting to wonder about the amount of debt the city-state is racking up.

Its oil production is dwindling, and its debt load is four times the average among other Persian Gulf states. Credit-rating companies are asking for more information to determine how sound the government really is.

"From published documents, it is difficult to get a picture of the complete financial situation," said Standard & Poor's analyst Farouk Soussa. "The transparency isn't good."

One of seven emirates making up the United Arab Emirates, Dubai, like other Middle East governments, has been on a deal-making binge. Companies owned or backed by the government have signed agreements or made plays for billions of dollars in assets this year, including stakes in American and European stock exchanges, a Las Vegas casino operator and, most recently, a chunk of Sony Corp. Part of Dubai's deal-making is financed by debt.

At the same time, other Dubai entities have launched expansion plans relying on public borrowing. Nakheel, a government-controlled company building a giant, palm-tree-shaped island development, placed $750 million in bonds this month to finance its plans. Government-owned Jebel Ali Free Zone recently listed 7.5 billion dirham ($2 billion) of bonds.
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Dubai also has taken a more-complex approach to investing overseas. Most other deal-making countries have used massive investment authorities to pursue their deals. The Abu Dhabi Investment Authority, for instance, bought a $7.5 billion stake in Citigroup Inc. last month. In contrast, Dubai's ruler, Sheikh Mohammed bin Rashid al-Maktoum, has entrusted a cadre of lieutenants to run his own and his government's business interests. They often compete with one another and hunt for deals independently, but they all ultimately answer to Sheik Mohammed.

The government association has helped a handful of Dubai corporate entities get high credit ratings. The assumption is that Sheikh Mohammed or his government will come to the rescue in a pinch. And if Dubai gets overextended, analysts expect the emirate's much-richer cousins in Abu Dhabi will lend a hand. Abu Dhabi is the capital of the U.A.E., and its ruler is the country's president. Sheikh Mohammed is prime minister.
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As its oil supplies dwindle, Dubai has diversified its economy into financial services, tourism and real-estate development, among other pursuits. Those revenue streams and their underlying assets are difficult to pin down without access to government books.

Intriguing. Emphasis added. If it is true that Abu Dhabi will step in in the event of insolvency we have the makings of an overinvestment problem like that which fueled the real estate crisis in the US in the eighties.

In a graphic accompanying the article Abu Dhabi's sovereign rating is given as AA/stable/A-1+. Abu Dhabi's debt as a percentage of GDP is 2.9%. Dubai's sovereign is "not available." Its debt as a percentage of GDP is 41.8%.

Jumeirah Village Circle

a self-contained community of over 6,000 villas and townhouses, jumeirah village is a 100% freehold residential developmentamidst landscaped boulevards & gardens, delivering unique lifestyle concepts to incumbents. jumeirah village is demarcated into three sectors that are located on the emirates road, near the jumeirah islands in dubai.

the development comprises a series of villages linked to one another by open landscaped areas and canals. jumeirah village offers 2,883 two to four bedroom villas with balconies and 3,184 one or two bedroom spacious townhouses with a multitude of ultramodern leisure and home accessories. when complete, these lovely residential spaces will be a striking blend of arabian and mediterraneanarchitectural styles and themes. they will feature distinctive red-tiled roofs, arches, carved doors, ornamental spiral columns, tiled floors & walls imbibing the very best of traditional middle eastern motifs and designs.

jumeirah village freehold residential project has the following themed areas:

• gateway village
• canal village
• paradise village (serenity village)
• marina village
• wadi village
• lake village
• waterscape village
• garden village

jumeirah village is built around gateway village that features extensive retail and leisure amenities. canal village has as its centrepiece a waterfront theme with scenic views. on the other hand, paradise and marina villages provide plenty of green open spaces and maritime activities for residents including provision of berthing space for small boats.

also part of jumeirah village are two international schools, town and country clubs, community centre, jogging and cycling trails, community sports and leisure amenities (football and cricket pitch, tennis courts, croquet lawn and swimming pools), medical facilities, veterinary clinics with 24x7 security. the development is expected to be complete by 2008.

this community project is being developed by the dubai-based master builder nakheel and will be released in phases starting from the fourth quarter of 2008.

the village has a centrally located park designed to attract residents and visitors alike. the park also has a sloping hill with the iconic sunrise viewing pavilion. in addition, it has a native botanical garden and an amphitheatre that connects it to the souq.

3 wadi walks stretch from the central park; lined with indigenous plant species they are ideal play areas for children and also for walking & biking. in addition to these lanes, there are 3 oasis promenades which are formal gardens with loads of greenery and game areas.

the various sectors are connected by a network of waterways or rivulets. numerous smaller parks are scattered across the development with some overlooking the streets and others on more expansive plots with play areas and water features.