Dumping on Dubai: Have Hard Times Hit the Emirates?
Over the last few months, Dubai's glittering skyscrapers have been diminished by the alarms about the emirate's economic woes. The news has not been easy to take for the showpiece city-state, the most populous among the seven sheikdoms that make up the United Arab Emirates. Indeed, even as the rest of the world spiraled into crisis, the UAE insisted that its brand-name city would not be drawn in by the downturn. In fact, the UAE established a "no news is good news" policy of sorts. In January, the government announced that fines ranging from $13,600 to $272,500 would be levied against any media outlet for publishing news that damages the "country's reputation or its economy."
But sometimes, the bad news has to be admitted from on high. The UAE's Minister of Economy Sultan bin Saeed al-Mansouri last week admitted that the economy of the world's fifth largest oil exporter is expected to shrink in 2009. He refused to give an indication as to the extent of the contraction, saying simply that the UAE would escape recession. The International Monetary Fund had previously said it expected the UAE economy to grow by only 3% this year after expanding by 7.4% in 2007 and an estimated 6.9% in 2008. (See 10 Things to Do in 24 Hours in Dubai.)
The towers of Dubai have been hardest hit. The large foreign banks that had been financing Dubai's real estate boom have pulled out, leaving behind a significant burden on local banks, who have turned to the UAE government for help to shore up their liquidity. To date, approximately $15 billion of federal money has been pumped into local banks. Company buyouts financed by Abu Dhabi — the capital of the UAE and the only emirate with petroleum wealth — are believed to be forthcoming, though no officials will discuss details. "Any bailout from Abu Dhabi will come very privately," says Christopher Davidson, author of Dubai: The Vulnerability of Success. "Abu Dhabi doesn't want the Dubai brand to suffer even if Dubai has disgraced itself with its economic planning." (See how Dubai placed among the top 10 architectural postponements.)
