The restructuring of Dubai

Dubai is down but not out. Flights are fully booked. Routes between Dubai and India are over-booked. Traffic jams have returned. Restaurants are busy if not packed.
Customers flock to well stocked supermarkets. Families go to malls and parks for recreation. Indians and other sub-continentals living in the Karama and Bur Dubai districts remain in situ. Indian-run shops carry on, although for many, business has slowed over the past year. Non-resident Indians are exploring property opportunities now that prices have fallen by 40-50 per cent from 2007-08 bubble highs and are expected to slide by another 20 per cent.

The population grew by 1.9 per cent to 1.7 million during the second quarter of 2009. The mass flight of thousands of Indian jobless ended last spring. According to statistics, the total number of foreign workers who left the emirate is 50,000. This figure is low. But no one knows how many departed for good. Some construction labourers have taken up employment in neighbouring oil-rich Abu Dhabi. Some workers have gone to gas-exporting Qatar. Others have returned home with contracts from employers who want them to return once construction revives.

Adaptability

Indians who have lost high paying public sector jobs are consulting, teaching or free lancing. One businessman, who launched his own consultancy, observed, “We know how to manage when times are difficult. We are flexible.”

Dubai is in waiting mode. Cranes stand sentinel over scores of unfinished buildings. Road works and other infrastructure projects have been put on hold. But Dubai is also changing. In a bid to recapture investor confidence, the emirate’s ambitious ruler, Shaikh Muhammad bin Rashid al-Maktoum, dismissed the head of the Dubai International Financial Centre and three members of the board of the Investment Corporation of Dubai.

These men were seen as the architects of the bubble. Dubai will be tested next month. Prospects will improve if investors snap up the emirate’s second $10 billion bond issue and Nakheel, the government’s property firm, repays in full a $3.5 billion Islamic bank loan.  The emirate’s total debt is estimated at $84 billion, some $59 billion of this owed Nakheel, the property arm of Dubai World which accounts for 20-30 per cent of the public economy.

A source at Dubai World said the state-owned conglomerate is ‘restructuring’. At least 12,000 of its 70,000 employees, many of them Indians, have been sacked. But that figure could be as high as 20,000. There will be more job losses during 2010, he said.

Dr Abdel Khaleq Abdullah, a leading Emirati commentator, dismissed reports of Dubai’s economic demise as ‘exaggerated’. Dubai no longer enjoys a growth rate of 14 per cent but most countries would be delighted with its five per cent. He observed that the slump “was not a knock out. It was strongest in the real estate sector. The business model is going through tough times but this will not last for too long”.
However, he warned, “I am not sure that recovery has begun”. Meanwhile, Dubai continues to stage tournaments and conferences.

The Dubai Air Show was a great success, netting lucrative deals for both commercial and military aircraft and a profit for organisers. The Dubai World golf tournament went ahead as planned although prize money was reduced from $10 to 7.5 million. The World Economic Forum’s Global Agenda conference brought 700 experts and scholars to Dubai for two days of brainstorming — at the emirate’s expense. Dr Abdullah said Dubai will not halt these events to economise. Conferences and well-staged events are essential to maintain Dubai’s high profile, its image as an economic powerhouse.

At nine minutes past nine in the morning on Sept 9, 2009, Dubai inaugurated its splendid new metro, the emirate’s answer to traffic snarls. On Jan 4, 2010, the anniversary of the assumption of rule by Shaikh Muhammad, Bourj Dubai, the world’s tallest structure, is set to open. The Bourj looms over the squat bulk of the Dubai Mall, the largest shopping mall in the world and the elegant Souq al-Bahr (Market of the Sea), an up-market shopping centre modelled on ancient Arab souqs. Here customers can dine in restaurants beside a pool resplendent with fountains which fire water high into the air with the crack of a pistol shot or the thump of a mortar.