"Worst of the downturn over in Dubai": Sheikh Mohammed

Dubai has passed through the worst of the economic downturn, says Sheikh Mohammed bin Rashid al Maktoum, ruler of Dubai and prime minister of the UAE.
Dubai’s aim to become a global economic player is undiminished by the financial crisis and the emirate is well placed to pay its debts, says Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai.
The speech to foreign investors at an event organised by Bank of America Merrill Lynch came less than two weeks after Dubai raised US$1.93 billion (Dh6.97bn), the first new loan from international markets since the crisis hit last year.
“The worst is over and Dubai is now well placed,” Sheikh Mohammed said in his speech in Dubai. “The global economic crisis, despite its impact, will not deter Dubai’s ambitions of implementing its development plans.”
The ruler’s comments helped pushed Dubai shares to their highest level in a week.
Sheikh Mohammed also expressed confidence that investors would subscribe to a second $10bn bond expected within weeks, after the Central Bank bought the first $10bn in February.
The $20bn bond programme was designed to ease repayments on $85bn in debt built up during the building boom of the past decade. There has been speculation on whether private investors will be interested in the second half of the bond.
“Those who know me trust me when I say that the second part of the bond programme initiated by Dubai recently will be well received by subscribers, and will contribute to settling Dubai’s financial obligations in the coming years,” said Sheikh Mohammed.
He reiterated the strength of Dubai’s links with Abu Dhabi, and told critics of their relationship to “shut up”.
“I assure you that we will be there for each other when we need it,” Sheikh Mohammed said.
Abu Dhabi’s oil and sovereign wealth savings are considered an important support to Dubai’s ability to service its debt, especially since credit markets tightened with the global banking crisis.
Dubai launched the $20bn support fund in response to the financial crisis, which caused property prices to fall, drained liquidity from banks and led to thousands of job cuts.
Defending Dubai’s response to the crisis, Sheikh Mohammed said: “We preferred to wait rather than rush into action, because we are keen to ensure that our major enterprises are restructured to allow them to have the momentum and strength they require to cope with the realities of the new economy.”
In the biggest sale of Islamic bonds in the Gulf so far this year, Dubai raised $1.93bn last month. Economists estimated that Dubai would need to either repay or refinance $10.1bn in debts coming due next year. It will need $12.1bn in 2011, $15.2bn in 2012 and $4.8bn in 2013.
The Government said on Sunday it repaid a $1bn Dubai Civil Aviation Authority sukuk due on November 4. Nakheel, the Dubai Government-controlled developer, is expected to repay a $3.5bn Islamic bond next month with bondholders due to receive more than $4bn in principal and profit.
“The speech delivers important reassurances,” said Eckart Woertz, the programme manager of economics at the Gulf Research Centre in Dubai.
“However, markets don’t operate on political statements but on economic realities on the ground. In that sense, the repayment of developer Nakheel’s bond in December will be an important indication. Narrowing spreads show that the markets have regained confidence in Dubai’s ability to meet its obligations.”
Mr Woertz said a lack of information on Dubai’s debt situation had contributed to market scepticism in the past.
Source: The National 9 Nov 09

Nakheel cuts 400 more jobs

From The National 8 July 09
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Nakheel, a property developer owned by Dubai World, has made about 400 more staff redundant as the company continues an overhaul brought on by the downturn in the property sector.
The redundancies were staggered over the past two weeks and are on top of the 500 jobs that were cut last December, a source close to the company said.
"We were given a redundancy package of six months' pay" one former staff member who was laid off last week said.
The economic downturn has battered nearly every Dubai developer, with property prices and sales falling sharply. Developers, who were mostly reliant on off-plan sales to finance the construction of their projects, have struggled to collect payments, leading to rising defaults, while payments to suppliers have been delayed.
Nakheel yesterday confirmed the redundancies as the company continues to readjust its current business objectives to match supply and demand in the most effective way, but declined to say how many jobs have been cut.
Nakheel recently merged a number of its business units, which are now undergoing resource restructuring to ensure efficiency and optimisation of skill and talent, the company said.
The source said the bulk of the cutbacks affected the company’s asset management and design (NAMAD) division, a unit that was formed only in February after the the design group and universe master planning divisions were merged. The source said Imdaad, a facilities management (FM) firm also owned by Dubai World, would now manage most of the infrastructure and facilities across Nakheel's projects.
But Nakheel denied this, saying: NAMAD's facilities management team is functioning as usual. Imdaad has been providing FM services to Nakheel as a service provider in various communities following the usual practices of engaging a service provider.
The redundancies come after at least five years of expansion, during which Nakheel took on staff for large salaries in order to resource its ambitious projects, which include the Palm island trilogy, The World and Waterfront.
It was a time when all Dubai developers scrambled to attract staff, with poaching being the norm and salaries being high.
A junior level staff member, for example, could earn about Dh80,000 (US$21,780) a month with a company such as Nakheel, according to Simon Hobart, the managing director of the recruitment firm Millennium Solutions.
Everyone was earning big money in the first six to eight months of last year, with the problems associated with that now being enormous, Mr Hobart said. Nakheel was paying people too much, it all went a bit mad. Some of these guys were only 24 or 25 years old. Today, they’d get a third of what they were on.
While there is no official figure on how many jobs have been lost in the property sector since the downturn hit, estimates suggest thousands have been made redundant across associated sectors, including construction.
Thousands of redundancies have also been made in the financial sector. The job cuts could have a longer-term impact on the property market because of a dwindling local population. However, developers owned by the Dubai Government are working to streamline operations and, through integration and mergers, reduce further risks.
Dubai World said last month the property activities of its subsidiaries, Leisurecorp, Dubai Maritime City and Dubai Multi Commodities Centre, would now be managed by Nakheel, also owned by Dubai World. Emaar Properties is also in advanced merger talks with Dubai Properties, Sama Dubai and Tatweer, companies owned by Dubai Holding.

Davidson on Dubai: 'Foreclosure on a dream'

From the Middle East Report issue 251 of Summer 09 written by Christopher M. Davidson, a senior lecturer in the School of Government and International Aff airs at Durham University. Mr Davidson is the author of Dubai: The Vulnerability of Success (Columbia University Press, 2008).
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Glitzy Dubai, long considered the new Monte Carlo or the Las Vegas of the Middle East, has suffered one of the worst crash landings of this global recession. Dubai might be considered a bellwether of the global credit crunch. Until recently touted as a beacon of progress in an otherwise unstable region, the tiny emirate’s seemingly innovative economic and political model is now unravelling, with no end in sight to the uninterrupted stream of bad news. Construction has ground to a shuddering halt, unemployment is rising, sovereign debt is exposed, lawsuits are being prepared, and the population is decreasing, as those who moved to Dubai in search of a better life have either lost their jobs or are cutting their losses and leaving.
To make matters worse, as the city empties itself out, traffic thins, and cars and credit cards are abandoned at the airport, the embattled authorities have embroiled themselves in fresh controversies by introducing protectionist policies for their citizens and a new media law that forbids criticism of the economy, and earning Dubai an anti-Semitic branding in the sports world by denying a visa to an Israeli athlete. With investor confidence in tatters and debt repayments looming, its humiliated rulers have had little choice but to turn to their wealthier neighbors. But although help has finally arrived, it is by no means the lifeline that the emirate really needs, and Dubai’s future hangs in the balance.
The Dubai Model
The story of the Dubai business model really begins in the mid-1990s. With oil exports having peaked at about 400,000 barrels a day, the four sons of the late Sheikh Rashid bin Said al-Maktum were committed to building a diverse, multisector economy to reduce their dependency on hydrocarbons and exposure to the vagaries of the international oil markets. If such diversification did not take place, it was understood that the emirate would eventually lose its economic autonomy and, by extension, its political autonomy within the seven-member United Arab Emirates (UAE). Dubai’s new post-oil economy capitalized on its long history of trade, merchant immigration and re-export activity, and its relative openness compared to its Arab peninsular neighbors. With its low taxes and strong regional contacts, Dubai hoped to reprise its role as the region’s premier entrepôt and go global with its brand of economic liberalization.
Crown Prince Sheikh Muhammad bin Rashid al-Maktum took charge of the situation. Supported by Maktum, his eldest brother and Dubai’s nominal ruler, he forged ahead with the emirate’s “free zone” policies. In the late 1990s, Muhammad’s strategy involved expanding the original Jebel Ali industrial zone where foreign companies could enjoy 100 percent ownership, and establishing several new free zones. Jebel Ali soon mushroomed to over 2,000 companies, many of which were European and North American. By 2001, a plethora of high-profile multinationals and other foreign companies, including Microsoft, Dell, Reuters and the BBC, were locating themselves in Muhammad’s new Dubai Internet City and Dubai Media City. Dubai effectively became the Middle Eastern headquarters of these big global economic players. Since then, many other free zones have opened, including entire “villages” for branch campuses of foreign universities and health clinics, and even a Dubai International Financial Centre that operates under English common law and attempts to bridge the time zones of European and Asian stock exchanges.
Dubai was also committed to building up a luxury international tourist industry. The Jumeirah International Group, established in 1997, was responsible for building a number of iconic resorts, including the Jumeirah Beach Hotel and the Burj al-Arab—the world’s only seven-star hotel. So strong was the emphasis on high end tourism that in the late 1990s, it was estimated that ten percent of GDP was spent on developing this sector. By 2008, with hundreds of hotels, including several dozen with five stars, the emirate was hosting over six million tourists a year. Backed by a successful airline, two annual shopping festivals, and a host of international sporting and music events, the number of tourists was predicted to climb to ten million or more by 2012.
To attract investment from wealthy individuals, a real estate sector was introduced in the late 1990s. Although somewhat controversial, given that it was against UAE law for foreigners to own property, Sheikh Muhammad bypassed this complication by initially allowing foreigners to buy renewable 99-year leases. Real estate accelerated when the Nakheel property company constructed two separate “Palm Islands” off the coast of Jumeirah and Jebel Ali featuring villas, apartments and, in cooperation with the Trump Organization and the Taj Group, several five-star hotels. These giant patches of reclaimed land expanded Dubai’s waterfront from about 70 to over 500 kilometers, given that each “palm” has several fronds and a number of additional exclusive mini-islands in the shape of Arabic lettering to represent one of Muhammad’s most well-known poems. In 2004, when both palms sold out, Muhammad instructed Nakheel to launch a third palm island and another archipelago further out at sea.
Following the death of his elder brother and his formal installation as ruler of Dubai in early 2006, Sheikh Muhammad decreed that foreigners could own real estate in “some parts of Dubai, as designated by the ruler,” and would be entitled to residency visas from the Dubai government, thus altering the previous rule restricting residency visas to those with proof of employment. To further alleviate investors’ risk-averse concerns, a law was passed establishing a Lands Department that would provide a centralized registry capable of issuing deeds. Demand for Dubai’s real estate projects soared, and additional developments were launched. In some cases, demand was so high that prospective customers were advised to arrive at sales centers on the morning of the launch in order to line up for lottery-like tickets that would entitle them to make a purchase. Emaar Properties, which became a 67 percent publicly owned company following its flotation on the Dubai stock exchange, pressed ahead with its magnificent Burj Dubai: a mixed residential, commercial and hotel complex boasting some 165 or more storeys and a dynamic design to be the world’s tallest structure.
By the summer of 2008, Dubai, on paper at least, had succeeded in diversifying its economy. With the non-oil sectors accounting for more than 95 percent of the emirate’s GDP, the hydrocarbon industry was pushed further into the background. An estimated $3 billion in annual foreign direct investment flows underscored Dubai’s reputation as the most vibrant economy in the region, and UN reports ranked the emirate as the seventeenth most attractive economy in the world for foreign investment. The free zones were booming, the hotels were full, and the city’s population had reached two million. Mega real estate projects were being announced on a weekly basis and the three biggest developers were estimated to have produced in excess of 30,000 new homes. By conservative estimates, investors were enjoying annual returns of over 20 percent on their deposits for houses or apartments, while some were “flipping” on their deposits within months for handsome profits.
Enter the Credit Crunch
In September 2008, with the credit crunch entering its second year, Dubai appeared to have been spared the toxicity spreading throughout economies in the West. New York Magazine claimed that Wall Street bankers were decamping by the dozens to Dubai which, if anything, was growing faster than before. Delegates in Kuwait’s parliament complained that even without oil Dubai’s economy was doing better than theirs. Sheikh Muhammad was hailed as a visionary ruler across the Arab world, and in some cases far beyond. From Dubai’s side the message was equally loud and clear: Dubai was circumventing the global economic tsunami. In early October at Cityscape 2008, the emirate’s premier real estate convention, plans for a one kilometer-tall tower were announced, even as the Burj Dubai stood unfinished. Jumeirah Gardens and Waterfront City, projects that would lead to a new residential area the size of Manhattan Island, were being promoted aggressively. In November, as perhaps the ultimate Bonfire of the Vanities, a $15 million party was staged at the brand new Atlantis Hotel. With hours of firework displays and guest appearances from A-list Hollywood celebrities, the launching of the $800-a-night resort on the outer edge of the Jumeirah Palm Island was a clear signal that Dubai was bucking the trend, and doing so with considerable panache.
Behind the glamor, however, the rot had begun to set in. Foreign investors’ interest in real estate was declining markedly and hotel occupancy rates began to falter as tourists turned to cheaper destinations. Most seriously, Dubai’s banks and mortgage lenders were struggling to find credit on the international market. Loans dried up, speculators began to disappear, and the first major wave of resale properties began to hit the classifieds as nervous expatriates sought to cut their losses and run. The confidence bubble was pricked and the Dubai stock markets went into free fall, with share prices for erstwhile government-backed blue-chips such as Emaar Properties shedding over 80 percent of their value by December. The two biggest mortgage lenders, Tamweel and Amlak, had to be merged under a new federal authority.
A strenuous chorus of defense and denial began, led by the authorities and joined by stakeholders in the Dubai model, including expatriates who had put their entire life savings into real estate. Academics, think tank professionals, bloggers and domestic newspaper editors—none of whom had identified shortcomings in the Dubai model, let alone predicted the crash—contributed to a stream of articles and opinion editorials claiming that the emirate’s economic fundamentals were perfectly sound, and some went so far as to state that Dubai was the safest place to anchor in the global crisis.
The Bubble Bursts
By the end of 2008, the doomsday indicators had increased: Hundreds of cranes stood motionless over incomplete projects, employee firings were rising, fewer lights were shining from the windows of tower blocks at night, and—refreshingly for some—Dubai’s infamous traffic jams were easing up. Legions of laborers were sitting idle in their camps, and a string of high profile suspensions and cancellations were tersely announced, including the short-lived Jumeirah Gardens and Dubailand, the emirate’s much vaunted Disneyland-sized theme park. Sensing that the international spotlight was beaming in, the government came clean and declared that it had accumulated a giant debt of $80 billion or more, most of which was due for reservicing over the next few years. To allay fears, officials stated that Dubai’s sovereign wealth, estimated at some $85 billion, would be enough to cover this.
But such claims were greeted with skepticism because the international media was reporting that much of the sovereign wealth was either inaccessible or had been eroded significantly by recessions in recipient economies. The major ratings agencies, including Moody’s, downgraded Dubai’s banks, and by February 2009 the emirate’s credit default swaps had rocketed to Icelandic levels. Expatriates, investors and tourists continued to vote with their feet as thousands of exit visas were being processed each day. Hotels engaged in a price war, slashing room rates by over 70 percent. Newspapers, bulletin boards and blogs groaned under the weight of hastily produced property advertisements, some of which threw in all furniture and fittings. For those laborers whose employers were no longer in business, hundreds were being rounded up each evening and bussed to the airport.
Dubai’s Descent
This economic collapse was taking place against an increasingly unpleasant backdrop of corruption, authoritarianism and protectionism. With investors seeking their money back, pyramid schemes that had been unchecked over the years were being exposed. Foreign investigative journalists reported on expatriate real estate developers who were being held without charge, and even companies backed by senior members of the ruling family were coming under scrutiny. Column space in domestic newspapers began to be handed over to the Dubai chief of police who, oddly perhaps, briefly became the government’s primary spokesperson for economic matters. He has blamed the crisis on greed (rather than a lack of regulatory infrastructure or sound economic planning) and has refuted foreign journalists’ accounts of the crisis. Other government spokespeople have claimed that negative reporting is evidence of an international conspiracy to undermine Dubai’s success.
New legislation was introduced at the federal level, seemingly at Dubai’s behest, that formalizes the protection of UAE nationals in their jobs. This, together with the circulation of a draft media law that would prohibit criticism of the economy (under which journalists could be fined up to $270,000), has sent out a fresh wave of signals that Dubai’s liberalization was distinctly fair weather. With the economic downturn, the political system is unable to adjust to the new realities. Perhaps the clearest example of the emirate’s liberal retrenchment was its denial of an entry visa to an Israeli tennis player who had been scheduled to compete in Dubai’s international tournament. The Women’s Tennis Association fined the Dubai organizers, which led to the withdrawal of the event’s major sponsor, the Wall Street Journal, and prompted the main US tennis television channel to boycott the event.
By the end of February, Dubai was effectively bankrupt as it struggled to service even the first of 2009’s major debt renewals. The Dubai stock exchange, which had earlier taken out loans to buy the Norwegian stock exchange, OMX, needed to refinance $3.8 billion of debt. A last-minute deal was reported in the domestic press as proof that Dubai could keep going, but it soon became apparent that only $2.5 billion of credit had been acquired on the international market, and that other Dubai entities had had to step in to make up for the shortfall. Rumors resurfaced that the emirate would have no option but to seek assistance from oil-rich Abu Dhabi, no matter how unpalatable such a move might be. Up to this point, Abu Dhabi had remained aloof from Dubai’s problems, having only injected $19 billion of liquidity into federal entities in November 2008, and in February having only guaranteed banks in Abu Dhabi, rather than across the whole of the UAE.
The Big Bailout
On February 25, a brief notice was posted by a Dubai government department that the UAE Central Bank, of which Abu Dhabi is the major stakeholder, had bought into a $10 billion five-year bond for Dubai. With interest rates set at four percent, this was a lifeline for Dubai, as the emirate had little chance of acquiring such credit elsewhere. Although not technically a bailout, Abu Dhabi had devised an unsubtle means of channelling aid to its beleaguered neighbor and thereby avoiding, or at least delaying, a complete meltdown of the Dubai economy. In many ways, Abu Dhabi can now dictate terms to Dubai, and will almost certainly seek to centralize the federation and rein in Dubai’s autonomy. But given the political culture of the Gulf states, this is likely to be as discreet as possible and will allow the Dubai ruling family to save at least some face. Nonetheless, just seven weeks after the bond was issued, the ruler of Abu Dhabi made a personal visit to Sheikh Muhammad’s palace and took an “inspection tour” of Dubai’s projects.
Abu Dhabi’s primary concern is unlikely to be the Dubai business model, but rather Dubai’s close relationship with its major trading partner, Iran. With Iran-Dubai trade having reached $14 billion in 2008, the emirate was understandably reluctant to align itself with Abu Dhabi and the United States in their efforts to isolate the Iranian economy. With the announced closure in early March of Dubai’s creekside jetties, most of which service dhows laden with goods destined for Iran, this may be Abu Dhabi’s first step of many in severing this worrisome link.
As yet, it is unclear how the Dubai model’s epitaph will read. The emirate’s debt continues to grow and Abu Dhabi’s influence can only continue to increase. Even if it weathers the global recession, the Dubai that emerges at the end of the storm will be a shadow of its former, fiercely autonomous self. Some may argue that Dubai has been in debt before, and has bounced back before. But in the past its debt has always been used to finance useful physical infrastructure, such as ports, airports, dry docks and bridges, most of which ultimately enhanced its traditional role as an attractive regional entrepôt. In contrast, the debts of the new economy have been used to build up sectors that have aimed to bring money to Dubai and keep it there, rather than allowing Dubai to serve as an interlocutor. This has allowed a distinctly unsustainable “moonbase economy” to form on the edge of a desert. Exacerbating the situation, the massive, unchecked influx of expatriates during the boom years has created an enormous demographic imbalance. Their departure will leave deep holes in the economy: unlike a recession in a developed country where redundancies will leave workers on the sidelines, in Dubai they have to leave
within a month as their residency visas expire. Their contributions to the domestic economy promptly cease, and the vicious circle continues.
With the benefit of hindsight, the Dubai model planners and visionaries must now realize that real estate, luxury tourism and a construction industry should never have been allowed to become central pillars of the economy. All were reliant on an uninterrupted stream of foreign direct investment and a perpetually favorable international credit climate. Little was done to slow the rampant speculation, and regulations were either insufficient or were introduced too late. No effort was made to build a knowledge economy as higher education remained little more than an economic sector, and no moratorium was placed on real estate projects, leading to a massive glut. Without longer-term visas or a road map towards citizenship status for real estate investors, Dubai also did little to engender loyalty. Perhaps the most incredible aspect of the Dubai crash was how quickly it happened: within weeks of the credit crunch hitting the Gulf, the emirate’s economy began to freeze up, and within months the coffers were empty. With no obvious “Plan B” and barely any contingency funding, the “Dubai vision” was never more than a giant gamble, most of it with other people’s money.

Dubai: Boom or Doom

From Travel Weekly, 9 June '09
A long, but very interesting article reviewing the indicators for imminent doom or future recovery in Dubai.
Re the reference to hotel prices, a current visitor is staying at one of the beach high end hotels for AED1200 p.n where last year he was paying AED3200p.n. I regularly receive flyers for Summer Specials including this year, the Atlantis which is now actually affordable for the first time. A couple of the business hotels in Old Town are now under AED400 p.n.
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Depending on whose claims you believe, this luxury mecca, the world's most ambitious playground, is either teetering on financial disaster or poised to dominate leisure and business travel in the Middle East for decades to come.

Dubai has always had its share of contradictions, not least of which was its transformation from an obscure, relatively oil-poor desert country into a high-end beach destination and commerce center built on the themes of first, biggest and best.

But as the global economic meltdown has made its way to this once seemingly unstoppable boomtown, the country is grappling with a new set of contradictions -- or at least contradictory scenarios about how the country is faring in the face of a global drop-off in ultraluxury and business travel.

According to widespread media reports, Dubai pinned a large part of its economy around both of those markets and has now become a symbol of excess run amok, with the government and developers teetering on the edge of massive defaults.

A New York Times article earlier this year cited reports that parking lots at the city's modern new airport were clogged with cars that had been abandoned by expats fleeing the country after losing their jobs and their visas.

Privately, some local business officials say Dubai is broke and that sister emirate Abu Dhabi is bailing it out to protect the United Arab Emirates as a whole and the region's reputation. But government, hotel and airline executives here insist that the gossip and foreign media reports are grossly exaggerated.

Yes, the economy and business travel have slowed, they say, and some projects have been delayed. But Dubai, they insist, is doing just fine, thank you very much.

"Total nonsense," Gerald Lawless, executive chairman of Jumeirah Hotels, said of reports of Dubai's demise. "It really is wrong." Lawless noted that occupancy at the company's beach hotels was 97% in April; however, that was on an average rate of $578, down almost 22% from $739 in the same month last year.

Dubai's skyline is still dotted by seemingly endless construction cranes. But they no longer run 24 hours a day like many did at the height of the recent construction boom. In fact, many are not running at all, and sentences here often begin with "Before the credit crisis ..."

Projects that have already been announced will continue, insists Dubai's commerce and tourism spokesman, Eyad Ali Abdul Rahman. Many in the planning stages, however, may at a minimum be postponed.

"Only about 2.5% of projects have actually been canceled," said Nigel Page, senior vice president of commercial operations for the Americas for Emirates Airlines. "Virtually all projects that have started construction will be built."

Moreover, despite the fact that the economic crisis has taken a particularly large toll on some of Dubai's key tourism bases, such as Britain and Russia, Dubai's Department of Tourism and Commerce Marketing says the number of visitors, which hit 7.5 million for all of 2008, is up 5% so far this year, while the number of visitors staying in hotels is up 7.5%.

The Russians, for example, "haven't stopped coming," said a tour guide with Arabian Adventures, an arm of Emirates Airlines that organizes excursions such as desert dinners and four-wheel-drive trips through sand dunes. "They just don't come in private jets anymore. They fly first class, and they don't get the Royal Suite, they just get a suite."

Fortunately for visitors, those suites are lot cheaper. The city's notoriously astronomical hotel rates are down as much as 60% in some cases. Yet they remain among the highest in the world.

"Some would argue that room rates going down are a good thing," Page said. "It really makes Dubai much more competitive."

Beaches still popular

Even Lawless, whose beach hotels once commanded some of the highest prices in the world, agrees the rate reductions aren't all bad.

"There is a pent-up demand for Dubai," he said. "Now it's accessible in terms of affordability."

He said rates were already in the process of correcting themselves as new hotels came on line last year. The number of hotel rooms in Dubai increased from 32,000 in 2007 to 40,864 in the first quarter of this year, according to the DTCM. Another 5,000 to 6,000 rooms are expected to come on line this year.

When the depth of the credit crisis and its global impact on hotels and tourism started to become fully apparent last year, it first seemed that Dubai and the rest of the Middle East might be spared.

Although the first cracks began to appear in September, the numbers improved again until December, when occupancy fell 16.5%, to 65.9%, rates fell 9.4% and revenue per available room dropped 24.3%, according to STR Global, a global alliance of Smith Travel Research.

In May, STR said, "Dubai has suffered dramatically compared with the Middle East region as a result of the recent economic crisis." Compared with the same period last year, RevPAR through March declined 35.9% in Dubai, driven mainly by drops in average daily rate, while the RevPAR decline for the entire region was only 13%.

"It's all variations on the theme of 'in the toilet,'?" said James Chappell, managing director of London-based STR Global. "Still, certain things need to be taken into account. One is that you are dropping from a very, very high base. Yes, it's bad, but average rates and RevPAR are still better than any city in Europe. ... It could be a lot worse."

Occupancy, he said, is still above 70%, which is considered healthy. And Dubai's rates are still the highest in the world, Chappell said, averaging $280. That contrasts with average rates in the U.S. that have been hovering just below $100. Only Russia had higher rates before the global economic meltdown, Chappell said, because it has such limited hotel supply.

Occupancies have rebounded in Dubai's leisure hotels, in part because of aggressive efforts by the government and air and hotel companies.

"We have planned for the crisis; we have a strategy," Rahman said, noting that the DTCM has 18 offices around the world.

As part of that strategy, the DTCM, along with Emirates Airlines and Jumeirah, has launched the "Keep Discovering Dubai" campaign, which includes hosting hundreds of journalists from around the world on three-day trips to the Emirates, aggressive advertising across Europe and packages promoted to consumers that include free and discounted hotel stays and airport transfers.

"People who are thinking about coming to Dubai are scared about their money," Rahman said. "So we are providing added value, things like children stay free. This is one of the things that will let us help them come to Dubai."

The country is also aggressively courting both tourist and meetings business from places such as China, whose economy remains strong, he said.

It was clear on a recent visit to the country that tourists are indeed still coming. Dubai's airport terminal, though big and modern, was packed. A chair could hardly be found in Emirates' sprawling business-class lounge. And negotiating the crowded gate and duty-free-shop areas was like trying to navigate a New York subway terminal at rush hour.

At the country's newest megaresort, Atlantis, which was built as a gateway from the Persian Gulf to the man-made Palm Island, the lobby, pools and aquarium areas were busy on a recent weekday, and resort officials said occupancies were in the mid-70s.

Business hotels, however, have taken a bigger hit than the beach resorts. On a recent weekday, a hotel worker at the Jumeirah Emirates Towers, across the street from the country's financial center, said that occupancy was just 48%.

Lawless, however, said he is seeing signs that "our exhibition and conference business is slowly coming back." The bulk of the county's tourism is from Europe.

The modern city also attracts a number of shoppers and tourists from places like Saudi Arabia. Last year, only 465,000 of the 7.5 million visitors to Dubai were Americans, and most of those were business travelers. Still, the DTCM, which has an office in New York, said it hopes to open a second, West Coast office to increase tourism from the U.S.

Emirates Airlines now has nonstop flights from New York, Los Angles, San Francisco and Houston, and it is eyeing service from Chicago.

Economy

Dubai is the second largest of the seven Emirates that make up the United Arab Emirates. Although its economy was built on the back of the oil industry, Abu Dhabi has the bulk of the Emirates oil. Petrodollars account for only about 3% of Dubai's gross domestic product, and it's estimated that the wells will be dry in 15 to 20 years.

Dubai Prime Minister Mohammed Bin Rashid al-Maktoum developed the country's grand vision to transform itself from a regional port into an extraordinary tourist destination and the most important city between Europe and Asia.

As part of that plan, the country has developed the famed man-made Palm Islands as well as "The World," a group of private islands that resemble a map of the world. Two other Palm Islands are also under development. Dubai is also home to the iconic, sail-shaped Burj al-Arab hotel, built just off the beach on the country's first man-made island.

But the theme that drives Dubai's development is "biggest and best."

Consider:
- Set to open in September is the Burj Dubai, the tallest building in world.
- The just-opened Dubai Mall is the largest in the world.
- The Mall of the Emirates houses the world's largest indoor ski hill.
- Dubai Land, which is still in the early stages of development, will be bigger than Disney World.
- The fountains outside the Dubai Mall and new Address Hotel shoot higher than those at the Bellagio.
- Near the port is the world's largest aluminum plant.

With much of the development being led by entities of an opaque government, it is difficult to determine, though, exactly how Dubai and its economy are weathering the economic crisis and the crash of its real estate market.

Page recalled that on a recent weekend he could hardly find a parking spot at one of the country's famed shopping malls. "So is the economy doing badly? It is down a bit, but I don't think it is doing that badly," he said.

Still, questions about Dubai's economic future and its plans for dealing with the crash of its real estate market were renewed last month when the country's finance minister was abruptly fired. Nasser al-Sheik was overseeing the administration of a $20 billion bond program launched by Dubai and purchased by the U.A.E.'s central bank to ease liquidity problems at a number of government-related entities, including developer Nakheel.

According to the Financial Times, the emirate has said it has about $80 billion in outstanding debt, and Nakheel, the development arm of the government that is building its World and Palm islands, is one of the main recipients of the bank bailout.

In addition to developments around Dubai, the government, through Dubai World, is a 50-50 partner in MGM Mirage's $8.5 billion Las Vegas CityCenter, which has struggled to meet its debt obligations.

Arthur de Haast, CEO of Jones Lang LaSalle Hotels, said it was hard to know exactly what was happening in the region, but he expected it to survive the real estate downturn.

"In the Middle East, at the end of the day, much of the development is driven by government-related entities," he said. "Even those that are so-called nongovernment are major families that are operating out there. They are all closely linked. It is a pretty tight-knit community, and the reality is you've already seen a big bond issue largely underwritten by Abu Dhabi. I think that Dubai itself may be under pressure, but there is sufficient liquidity within the U.A.E. as a whole to sufficiently manage the situation."

In an interview podcast available on Emirates Airlines, Mohammed bin Ali al-Abbar, director general of the Department of Economic Development and chairman of Emaar, which is developing the Burj Dubai and Dubai Mall, said the U.A.E. has taken necessary steps to protect the economy.

"The global situation is affecting everyone," al-Abbar said. "The good news in the Middle East is that the fix really starts from the banking system. The banking system in the Middle East is quite healthy. The banks have been regulated in a first-class manner."

Still, he said, consumer sentiment and "a little bit of tourism has been affected."

Asked if the recently opened Dubai Mall and the planned September opening of the Burj Dubai will be affected by bad timing, he said, "It depends on who you are dealing with. If you are dealing with a developer that has leveraged heavily ... then I think you would have a challenge. Thank God we are smart. We are lucky. We don't have that issue."

A lingering question, though, is how al-Maktoum's grand vision for Dubai might be blurred in the long term by the current crisis.

"In a year-and-a-half, two years, one year, as the world gets back on its feet, I think this development and the city of Dubai are ready to be at the front," al-Abbar said.

Chappell and de Haast agreed that the country's future, especially its tourism markets, remains rosy.

"I think demand will bounce back," de Haast said. "As a destination, one thing that Dubai is very good at is marketing itself extremely well."

Chappell said Dubai has "had a big shock" that will serve in some respects as a reality check.

"They had a big scare," he said. "But what's not to like? They are going to come back, and they are going to come back strong. ... They might be more selective in their projects, scale back some of the more ridiculous ones. But I think in many ways, as ridiculous as this sounds, this whole thing will have done them a huge favor."

UAE job losses set to continue amid recovery

From ArabianBusiness.com 25 May '09.
Where's this economic recovery happening? Its not happening in my little corner of Dubai where in the last 24 hours two more friends have been made redundant and will leaving the country as there's no work in construction for them. Heard all the 'green shoots' stories blah, blah, blah? You just have to look around you in the UAE to see signs that things here aren't good and they aren't going to improve in the foreseeable future. Raise this question and the response seems to be 'if you don't like it you can leave' and there are plenty of people doing just that or "It can't be that bad because last weekend Dubai Mall /BurJuman/everywhere expect Bin Hendi Luxury Avenue was packed" but how many of those people in the malls were actually buying and how many were there just to escape the heat? If even half the rumoured number of people leave the UAE at the end of the school year (June) and don't return in September, the loss of population will have a noticeable effect on the local economy.

Rents continue to fall. Unfortunately our current landlord lives in a parallel universe where rents haven't dropped, he refuses to lower the rent so we're moving out - the people in the villa next door moved out three weeks ago for the same reason and are living just round the corner at a considerably cheaper rent. We recently looked at a villa in Umm Suqeim 3 that 5 months ago was rented for AED300,000 but now the landlord's asking AED175,000 and still hasn't had a bite in all that time. At this time last year, renting a house in Dubai was a hard task, rents were astronomical and a lot of compounds had waiting lists; now, we drive around the streets and count the "To Let" signs which seem to be growing in number weekly. In the Garhoud area alone, we've looked at maybe 15+ houses, all in the AED170,000-190,000 price range. Last year every one of them would have been in the AED220,000-250,000 range.
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Job losses will continue to take place in the UAE even as economic recovery takes hold, a leading economist in the region warned on Monday.

Further redundancies would happen in the Gulf state over the coming months because the jobs market lagged behind the real economy, said Marios Maratheftis, chief economist at Standard Chartered in the Middle East.

“Inevitably job losses are taking place and, in my opinion, they will continue to take place even as the economy is recovering because the jobs market is a lagging indicator of the economic cycle,” said Maratheftis during MegaTrends, Essential Strategic Insights 2009 in Abu Dhabi.

Despite the economic crisis hitting the UAE in September, it wasn’t until January that staff numbers were cut by many firms, especially those in the real estate, construction and banking sectors, he said.But he said most job cuts had already taken place.

As many as one in four expatriate employees in the UAE have either lost their job or fear they will over the next 12 months, according to a survey released in March by market research company Real Opinions.

The economic tsunami hits the sandy shores of Dubai.

In the past couple of months the world seems to have shifted on its axes (yep, that's the plural of axis). The tsunami that is the world economic downturn has arrived on the sandy shores of the UAE. A couple of weeks ago, the Dubai government announced that it has debts of $80 billion. Abu Dhabi has stepped in with loans to Dubai, but at what cost nobody seems to know, though there are some interesting rumours on the street which involve the future of Emirates Airlines. Several of the major developers here have put what were considered flagship developments "on hold", and redundancies are now happening on a daily basis: 500 people were let go from Nakheel last week, 400 from Emaar, and 70 from the World Trade Centre Real Estate division. There have also been redundancies at Omniyat, Al Ghurair, Damac and Better Homes amongst others.

Meraas has also made a number of staff redundant and their 350 billion dirham Jumeirah Gardens is one of the developments now on the backburner or in CorpSpeak "....we are reviewing...the phasing and roll-out of the Jumeirah Gardens project...". It was the proposed development of Jumeirah Gardens which caused us to be evicted at speed from Satwa by our landlord (Al Ghurair). In the past few months huge sections of Satwa's housing area have been bulldozed and it now seems that those piles of rubble will remain into the foreseeable future as silent monuments to greed gone mad. Still, if the deferral of Jumeirah Gardens means a reprieve for the best Pakistani restaurant in the known universe then its a good thing. Schon Properties developers of the Lagoons have announced they are 'scaling back'. Trump Tower is on hold as of yesterday with resulting redundancies here in Dubai. Australia's largest construction firm Leighton Holdings Group was involved in the building of Trump Tower through its connection with Al Habtoor Engineering. Despite the announcement that Nakheel will cover all Al Habtoor Leighton's costs, Leighton's share price in Australia has dropped 7.3%. All the redundancies referred to are expats but of course the labourers from the sub-continent will be effected immediately too: No work=go home.

The government in the UAE is closed for business for the next 10 days due to Eid so there's no official visa or employment related information available. The websites are no help. I imagine sales of the latest issue of UAE Labour Law at McGrudys have rocketed as a result. There's a growing number of people facing redundancy who can’t find the answers to some very important questions.

1. Once a person is made redundant they and their family have 30 days to leave the country before their visas are cancelled. If they are lucky, they might get 3 months notice period or their employer may hold off cancelling the visa until the employee finds a new job or makes arrangements to move back to their country of origin. 30 days isn't very long to find another job or failing that, organise flights home, pack up a household etc. As the holiday season is close, flights to most Western destination are heavily booked.

2. My understanding is that many of the people being made redundant will also be banned for 6 month from working in UAE. This is a blanket action but the ban can be “bought off” for 1,000 dirhams by the next employer (if there is one…..).

3. How do you get your rent back when its been paid 12 months in advance and you have 30 days to leave the country?

4. Can you get a refund on school fees paid in advance?

5. There is a justifiable fear that the bank accounts of people who’ve been made redundant will be frozen. This happens in Dubai.

6. Will an exit visa system (like that in Saudi) be introduced so no expat resident can leave Dubai unless they can produce a letter from the bank stating that their debts are cleared?
If someone has purchased a property here and, worst case scenario can’t get another job in Dubai, how do they pay the mortgage? Renting is the obvious answer but while rents aren’t going down as yet, the number of renters will fall eventually.

7. What if you’ve bought “off plan” and the development has now been put on hold? In Dubai, the purchaser pays the full price of the unit before they move in, but what if there’s nothing to move into? Residential units in the Lagoons which were initially scheduled for completion by December 2007 are now expected to be ready in 2011.

8. Rumours of increasing numbers of loan defaults are starting to circulate; people who are ‘cutting and running’.

9. As of last week, you cannot get a credit card in Dubai unless you have worked for the same employer for 2 years earning 20,000+ dirhams per month (this from Barclays Bank and confirmed by a contact at HSBC)

10. No loans to lease a car available from any of the banks, strict criteria for loans for vehicle purchase now in place.

I’m no expert and if anyone can help answer any of these questions it’d be appreciated as there are some very worried people searching anxiously for answers.