An Emirati man poses for a picture in front of a 38-meter yacht on display at the Dubai International Boat Show in the Gulf emirate's marina on March 3, 2009
Over the past 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 U.A.E. insisted its brand-name city would not be drawn in by the downturn. In fact, the U.A.E. 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 that published news considered damaging to the "country's reputation or its economy."
But sometimes, the bad news has to be admitted from on high. The U.A.E.'s Minister of Economy, Sultan bin Saeed al-Mansouri, last week acknowledged that the economy of the world's fifth largest oil exporter is expected to shrink in 2009. He refused to give an indication of the extent of the contraction, saying simply that the U.A.E. would escape recession. The International Monetary Fund had previously said it expected the U.A.E. economy to grow only 3% this year after expanding 7.4% in 2007 and an estimated 6.9% in 2008. (See 10 things to do 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 U.A.E. government for help shoring 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 U.A.E. 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.)
"The bubble has finally burst," says one American expat. Some people point to mixed blessings of the financial downturn. Rents, which were at unbearable highs last summer, have now plummeted at least 25%, and property prices are down as much as 50% since August of last year. But while there is some respite from the dawn-to-dusk hammering and drilling that came with Dubai's construction boom, some $8 billion in projects have now been either scrapped or put on hold. The city's notoriously brutal traffic jams have eased somewhat in recent weeks since the reported exodus of thousands of expatriates, who make up more than 85% of Dubai's population. The departures, however, could also be a sign of job losses: foreigners are generally not permitted to live in Dubai without a work visa.
But the city-state has its defenders. "Dubai-bashing is in fashion right now," says Hassan Jarrar, head of wholesale banking for Standard Chartered Bank in Dubai. "Like most governments, the U.A.E. wants to limit the fears of not just the people inside but also external investors. Are they understating the problem? I don't think so." He insists that "the difference between Dubai and Singapore or Shanghai is, in Dubai, when cranes leave site here, they leave when construction is finished." A trip down Sheikh Zayed Road, Dubai's main thruway, named after the U.A.E.'s founder and first President, reveals thousands of cranes still operating and the first line of the city's metro on track to open this summer. (See pictures of Dubai.)
A new billboard has gone up just below Dubai's World Trade Center. It features images of Dubai's more recognizable landmarks, like the sail-shaped Burj al-Arab hotel and Burj Dubai, the world's tallest building. They are all adornments for the subject of the billboard: Dubai's leader, Sheik Mohammed bin Rashid al-Maktoum. The sheik has been rumored to have suffered significant health problems from the strain brought on by the emirate's economic woes. The billboard is meant to belie those rumors; it shows the sheik, 59, looking sharp, vibrant and healthier than ever. Behind his picture is a simple caption in Arabic: "We don't wait for things to happen, we make them happen." And if you want to say otherwise, Dubai doesn't want to hear it.