During the late 70s and 80s, I visited Dubai quite regularly. Like any cities in Asia, there were some new high rise buildings amidst plenty of low rise shop houses on the ground floor and offices on the higher level. On the roads, traffic was noisy with cars honking relentlessly. The air was filled with vehicles exhaust and when the wind blew, dust and sand swirls into the air. There were no paved pedestrian walk; neither were there any green such as trees or grass. The place was generally dirty. Each trip after I return to the hotel, I had to wipe out the sand from my shoes. Summer was burning hot and shops closed in the afternoon after 2pm. I love the local food especially the chicken tikkas and the curry Marsala.
Then in the 90s, Dubai started the greening process with parks created and trees planted. Pedestrian walkways were constructed and the building boom also started. By the end of the millennium, Dubai was set on a transformation at a pace nobody had envisaged. The roads, airport, buildings and shopping malls have completely transformed Dubai into a cosmopolitan city that match the most modern city in the world.
One has to ask, how a desert town become a modern city in just over a few decades. First reason is the unlimited amount of money from the oil revenues from around the region. The second is the sheer ambition of the sheikh of Dubai to build Dubai into a super city, financial and commercial centre that can match London and New York. The third is the success of earlier investments which attract more investments. Fourthly, abundant cheap labour also contributed to Dubai success.
In the last 10 years, Dubai has been on a great acquisitions trail around the world. It snapped up ports, hotels, properties, banks and very big companies with the sheer power of money. It started building mega projects in Dubai. To do all this, Dubai borrowed a lot of money without any problem because creditors believe the loans have the backing of the sovereign government. In all about 90 Billion were borrowed for all these mega projects.
Like any economic cycles, the boom must be followed by the bust. The world financial crisis was the catalyst to this property bust in Dubai. In spite of the deep pocket of the Dubai government and the other emirates, Dubai was to be no exception. Though in my opinion, Dubai is not going to default. My feel is that Abu Dhabi is patiently waiting by the sidelines to scoop up the distress assets at a cheap price. After all, of the 7 emirates that formed UAE, Dubai has no natural resources. What it has is ‘other people’ money and has acted as if it is the richest emirate. The richest of all is Abu Dhabi with is oil wealth.
to be continue
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