Bye Bye, Dubai?

The worldwide economic house of cards continues its collapse. The latest victim? Dubai. On February 11, the New York Times carried an article entitled, "Laid-Off Foreigners Flee as Dubai Spirals Down" Click here to read more. Before examining this report, let's look at a bit of background on Dubai.

What and where is Dubai? It is a city/emirate within the country known as the United Arab Emirates (UAE) See Dubai map. An 'emirate' is defined as a domain that is ruled by an emir. An 'emir' is the term applied to a leader, or chiefain, especially in the Middle East. The UAE is located in the Middle East. It borders Saudi Arabia and Oman. See UAE map. It is made up of seven emirates (Abu Dhabi, Dubai, Sharjah, Ajman, Ras Al Khaimah, Fujairah, Umm Al Quwain) that were previously known as the Trucial States.

What is Dubai's recent history? The following is a partial quote from an official Dubai government website: Click here to read more

"In the 1980s and early 1990s, Dubai took a strategic decision to emerge as a major international-quality tourism destination. Investments in tourism infrastructure have paid off handsomely over the years.

Dubai is now a city that boasts unmatchable hotels, remarkable architecture and world-class entertainment and sporting events. The beautiful Burj Al Arab hotel presiding over the coastline of Jumeira beach is the world's only hotel with a seven star rating. The Emirates Towers are one of the many structures that remind us of the commercial confidence in a city that expands at a remarkable rate. Standing 350 meters high, the office tower is the tallest building in the Middle East and Europe.

Dubai also hosts major international sporting events. The Dubai Desert Classic is a major stop on the Professional Golf Association tour. The Dubai Open, an ATP tennis tournament, and the Dubai World Cup, the world's richest horse race, draw thousands every year."

The world's tallest building is being built there. Man-made recreational islands were constructed for those in the world's wealthiest class to enjoy. At least one could admire Dubai's attempts to diversify its economy.

These projects were begun when oil was approaching $100 a barrel, and economic boom times seemed to have no end in site. Tens of thousands of people from around the world flocked to Dubai for good-paying jobs and low, sometimes non-existent, taxes. As a matter of fact, 90% of Dubai's population is comprised of these foreigners.

That brings us to Sofia's story in the Times article:

"Sofia, a 34-year-old Frenchwoman, moved here a year ago to take a job in advertising, so confident about Dubai’s fast-growing economy that she bought an apartment for almost $300,000 with a 15-year mortgage." ... “I’m really scared of what could happen, because I bought property here,” said Sofia, who asked that her last name be withheld because she is still hunting for a new job. “If I can’t pay it off, I was told I could end up in debtors’ prison.”

Well, debtor's prison certainly worked wonders during the Middle Ages, didn't it? It worked so well that it totally eliminated the problem of people going in over their heads in debt, right? Similarly, when punishment for stealing a loaf of bread resulted in the thief's hand being cut off resulted in the virtual end of theft as a category of crime. But back to Dubai.

Dubai may also have the dubious distinction of having the world's largest used car lot. It's known as the Dubai airport parking lot.

"With Dubai’s economy in free fall, newspapers have reported that more than 3,000 cars sit abandoned in the parking lot at the Dubai Airport, left by fleeing, debt-ridden foreigners (who could in fact be imprisoned if they failed to pay their bills). Some are said to have maxed-out credit cards inside and notes of apology taped to the windshield."

The Dubai government has officially declined comment on this economic collapse-in-progress. However, the word on the street, in the form of real estate and auto sales, says it all:

"Some things are clear: real estate prices, which rose dramatically during Dubai’s six-year boom, have dropped 30 percent or more over the past two or three months in some parts of the city. Last week, Moody’s Investor’s Service announced that it might downgrade its ratings on six of Dubai’s most prominent state-owned companies, citing a deterioration in the economic outlook. So many used luxury cars are for sale , they are sometimes sold for 40 percent less than the asking price two months ago, car dealers say."

Many people must wonder if no corner of the globe is immune from this recession/depression. We might have thought that even though oil prices are down to ~$35 a barrel, the oil-producing Middle Eastern countries would still stay monetarily afloat, minus a few Mercedes or so. But look at Dubai. Its foreign population is fleeing. And what of its native populace? Neighboring emirates of the UAE are not helping Dubai. Neighboring Middle Eastern countries are not helping. It has become every group for itself.

Now is the time for a unified vision and approach. Not fractured fearful reactions. Yet what has history shown us? The Great Depression of the 1930s did nothing to unite nations in the common bond of economic despair. It was followed by World War II, setting the world chessboard for the matches we've been playing the past 65 years.

Will this current economic free fall result in a reshuffling of the chess pieces? Maybe, it's time to change the game.

See my other posts on emirates: Exploring Abu Dhabi, Exploring Ajman, and Exploring Fujairah