Dubai doesn't glisten or gleam under the blistering 40 degree desert sun quite so much these days. Flashy sports cars are coated in desert dust and abandoned at kerbsides or in the airport carparks, with keys hanging limply in the ignition.
In the up-market Marina - the world's largest artificial harbour - yachts and boats are plastered in 'for sale' signs. Luxurious marble clad apartments lie empty and silent. And the Palm Jumeirah development - the extraordinary man made palm shaped island where, a couple of years ago lots were fought over in a frenzy of excitement by Brad Pitt, David Beckham and countless other celebrities, all desperate for a private villa with its own beac and fake marble pillars – is now home to a good deal of knotweed, peeling paint and negative equity.
While Dubai's ruling family, the Maktoums, have done their utmost not to broadcast the fact, times have been tough in Dubai since the property bubble burst and residents saw the stock market colapse and their investments tumble by more than 700 per cent. More than £300 billion of planned development projects have been cancelled or put on hold, including ambitious plans for the worlds first kilometre-high tower and a mega develepment of homes, shops and leisure facilities in the desert once billed as 'bigger than Hong Kong'.
But this week the party was well and truly over when Nakheel, one of the state's main developers, and its parent company, Dubai World, made a desperate request to suspend all repayments on nearly £36 billion of loans, leaving the Dubai economy buckling under £ 48 billion of debt. Yesterday, as accountants Deloitte were called in to advise on financial restructuring, Dubai World was asking creditors to give it breathing space on the loans so that it could continue work on projects all ready under construction. The fear is, if creditors pull the plug, Dubai will soon resemble an enormous abandoned building site, with a knock-on-effect on the already fragile global economy, and Britain in particular. The fortunes of Dubai and the UK are alarmingly intertwined. Dubai owns ports and ferries group P&O, budget hotel chain Travelodge and a 20.56 percent stake in the London Stock Exchange. Meanwhile, the U.K has invested an estimated £3 billion in Dubai and the crisis has meant that U.K companies are thought to be owed more than £400m by debt ridden Dubai firms.
The shockwaves are still reverberating around the financial world, but for many, the only surprise is it took so lang for this money-obsessed house of cards to implode. It's barely a year since the world looked on in amazement as, in the middle of the recession, Dubai threw a £12 million launch party for the Atlantis resort - an £800 million pink wedding cake of a hotel, boasting 1,500 rooms, its own aqua adventure park - with a special show by Kylie Minogue, accompanied by the world's biggest firework display. But it seems the launch of the Atlantis may have been a desperate last ditch attempt to paper over the cracks that have been showing for a long time.
Ruler Sheikh Mohammed bin Rashid Al-Maktoum had continually dismissed concerns over the city-state's liquidity and claims that it constantly overreached during the good times. When asked about the debt, Sheikh Mohammed assured reporters in a rare meeting two months ago: 'We are all right' and 'we are not worried', leaving details of a recovery plan - if such a plan exists - to everyone's guess. Then earlier this month, he told Dubai's critics to 'shut up'.
Three years ago when I last visited Dubai, things were very different. The skyline was dominated by half-finished skyscrapers - more than a quarter of the world's cranes were working flat out to satisfy a ravenous demand for property. Forty storey tower blocks went from conception to opening ceremony in just two years. Work was around-the-clock and you had to close your windows at night to block out the noise from the construction. Every day hundreds of trucks arrived laden with palm trees, acres of emerald turf and marble as the Maktoums transformed what had once been little more than a fishing village into Vegas-on Sea, without the gambling.
It was an ingenious idea. With oil reserves dwindling, the Maktoums hoped to reinvent their tiny fiefdom as a financial centre, trade hub and tourist hot-spot. Nothing was too expensive or too ambitious - a 'seven-star' hotel shaped like a yacht, an indoor ski resort complete with real snow, a black run and a bobsleigh track. No problem was insurmoutable. What do you do then when there wasn't enough coastline to sustain their projected 40 million visitors per year by 2015? Simple, just cart in seven million tons of rock and 94 million cubic meters of dredged-up sand. And build yourself a series of handy archipelagos a couple of miles out in the Arab gulf.
First came the Palm Jumeirah, three miles wide and shaped like a giant palm tree with mile-long fronds housing 100,000 people in luxury apartments, hotels and bespoke villas in a choice of 'Mediterranean', 'Arab', 'Mock Tudor' or 'American Ranch', each with its lush green lawn, private beach and servant's annex. It was an extraordinary move but no one questioned it – or at least not out loud, in the Marktoum's earshot. And when the 'villas' went on the market in 2002 , long before there was any land, let alone a show home, they were snapped up in days. David Beckham bought one, as did Michael Schumacher, Rod Stewart, Brad Pitt, Michael Owen and West Hams Kieron Dyer. Indeed, over the past ten years, more than 100,000 Brits have bought second homes in Dubai – many of whom will be regretting it sorely now prices have plummeted.
Next came 'The World' - a collection of islands shaped like the world where the rich could buy their own 'country'. But what about the environment - the delicate marine life? Not a problem said the Maktoums, who insisted they'd installed such an efficient drainage system it actually encouraged marine life to the area. And with minor irritation swept out of the way, other, even wilder projects, got the go-ahead. So there was Hydropolis, an under-water hotel, and the £ 3.5 billion Dubailand - an Arab Disneyworld which was to be bigger than Monaco. There was no such word as 'can't and seemingly no concern that, one day the money might dry up.'
With its odd mixture of draconian Islamic laws, eye watering capitalism and enormous ex-pat presence, Dubai was always going to be a volatile place. (Remember Briton Michelle Palmer, who was flung into prison for having sex on the beach after getting a bit too stuck in at a champagne buffet?) Around 85 per cent of the 1.4 million population are foreigners (there's a 120,000-strong expat British community) from 160 countries. Which sounds wonderfully multicultural, but it doesn't work quite like that. Instead the Marktoums own everything, there's very little political or press freedom - phone tapping is common - and the indigenous Arabs favour their own.
So while the United Arab Emirates citzens receive free healthcare and education, and even a house (if they marry anotherUAE citizen) foreign workers are considerably less cosseted. Worst off are the hundreds of thousands of Indians, Pakistanis, Bangladeshi's and Sri Lankan's, all lured to dubai by the promise of construction work with a daily wage of $4.00 and the hope of a better life for their families back home. For years they have worked 12-hour shifts in the blistering 45c heat. Risking their lives to build their lives to build this glistening city of dreams. Site safety, although improved, is still woeful. With dozens of workers falling to their deaths from buildings each year, overcome by heatstroke. According to an industry insider: 'There's a rule that no one must work outside if temperatures hit 50c. The trouble is, that however hot it becomes, official records never register it above 50. And it's not just the construction workers. British expats complain of suffocating governmental control. Some Britons claimed to have had their passports confiscated by their employers when they arrived and visas were withdrawn at the first sign of dissent - particularly journalists who break the two cardinal rules - 'never report on the Royal family and never report on the recession'.
Inevitably, though, many expats themselves are now running into financial difficulties - with severe consequences. For as well as laws on adultery and public displays of affection. Dubai treats debtors with equal harshness. A bounced cheque or a default on a credit card means a prison sentence and thousands are in Dubai's prisons - including more than 20 Britons. In recent months, more than a quarter of expats have been forced to leave as jobs and bank balances have evaporated. Some have sold off their possessions in 'everything must go' garage sales. Others have fled before they're found out, making a run for the airport and leaving behind their expensive cars with outstanding hire purchase payments.
Today, as the Dubai economy finally buckles under the £80 billion-worth of debt, the world is waiting to see if Abu Dhabi (Dubai's oil-rich neighbour and the capital of the United Arab Emirates) will come to the rescue once again. It has already bailed out Dubai with $10 billion this year. This time, even the Makatoums might feel the pinch.
story by Jane Fryer - Daily Mail 27/11/2009