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 government says the real number is much lower. But the stories contain at least a grain of truth: jobless people here lose their work visas and then must leave the country within a month. That in turn reduces spending, creates housing vacancies and lowers real estate prices, in a downward spiral that has left parts of Dubai — once hailed as the economic superpower of the Middle East — looking like a ghost town. [source]
I wonder, is the romantic tale of Dubai really over? Can it survive the global recession? Can it be revived? Or will it become an abandoned amusement park with cobwebs on the ferris wheel? Will it end up sinking and becoming a mythological city like Atlantis?
More importantly [for us], will Dubai’s loss end up being Jordan’s gain? Even just a little?
> I wonder, is the romantic tale of Dubai really over?
No, net visa issuance is up.
> Can it survive the global recession?
Not can “it”, but can “they”? Dubai is not soverign, it exists within the UAE — and is thus under the wing of Abu Dhbai. Abu Dhbai is still massively (massively!) wealthy and easily able to provide ample liquidity to the Central Bank. Further, falling prices will help Dubai more attractive to a wider range of people — in the same way that 40% of defaults in the U.S are being bought up by “bargain hunters”.
> Can it be revived?
It’s not dead, far from it. Dubai has slowed down, it will coast along for a while, and then as the global economy picks up again, so will Dubai.
> More importantly [for us], will Dubai’s loss end up being Jordan’s gain? Even just a little?
Jordan is in no way a substitute for Dubai, either for business or tourism. Money will not simply re-direct. In fact, it may hurt Jordan as wealthy Gulfites become more reluctant to splash their cash: I imagine the UAE makes fairly generous donations to Jordan. And will Kuwaitis be willing to build another Jordan Gate? And so on and so forth.
The ace in the hole for Dubai is definitely Abu Dhbai though. Imagine if China were benevolent with its finances towards America.
As long as they have oil, they’re OK.
noitwillnot said it well. I’m much more negative over the short/medium term. Their boom is highly debt-driven and that is not sustainable and so Dubai is and will continue to feel a lot of pain. I suspect intra-sheikhdom quarrelling will be the catalyst since Dubai’s finances without AD’s backup is in deep trouble. It’s also worth noting that AD will feel the pain too.
Over the longer term, Dubai is on the map to stay for a lot of reasons. For starters, its strategic geographical location has attracted the Middle Eastern HQs of many multinationals in various industries. And for Saudis looking for some “fun” will go there.
All in all, the free fall will continue for a year at least. The landing will be hard but not as messy as it could be because of the AD cushion. And then in the longer term, Dubai will recover in a way that HAS to be (i hope) a little smarter.
Implications on Jordan, I think, can be huge. I’d be interested to know repatriation figures from Dubai to Jordan. I’d also be interested in seeing figures on Dubai-based investments in Jordan. But that also applies to the gulf as a whole. I think I’ve said this before: if the gulf sneezes, Jordan will catch a very bad cold.
When you think about the implications for jordan: Think about the quarter of a million jordanians working there..Think unemployment rates becomes more bizmal…Think of the dinar value; think of our 6 billion dollar trade deficit that is being offset by the money sent by expats…
No sir, it won’t be good for jordan.
*becoming
foreigners moving to dubai to take advantage of tax free income have begin to realise that its not so much of a good investment….expats used to purchase property and rent, however they soon realised that the taxes paid on these properties was in fact reducing their profit margin and sometimes even losing money therefore not a very attractive picture was drawn…..Dubai is a fake town with there high towers and expensive architecture…….basically what I am trying to say is that they did not evlove to what they are today it was a sudden change and sudden changes dont usually go down to well…..evolution and progress takes time and a need to initiate that evolution….dubai the only need was to attract foreigners and therefore money that is not justifiable and I believe it is the begining of the end for the hype of Dubai……people should think about Abu Dhabi for investment or the next hype in the Middle East……
Dubai – Fake bubble that is reducing in size
I agree with mohannad load of Jordanians work in Dubai and support the Jordanian economy, Jordan’s economic stability is linked to a great margin to the gulf’s economical stability either by expats working there or by the investments that are carried out by gulf businessmen and investors.
Dubai is not a fake city as some say it is not only skyscrapers and luxurious architecture it is the buisness hub of the middle east what’s important is the insides of these skyscrappers all the regional offices of the major global companies operate from dubai!!!
And that’s why Dubai got hit hardly…Dubai will recover as soon as the world economy will recover
Dubai is not only fake but a city of salt soon to be dissolved..
Whether is good for Jordan or not,that’s beside the issues and that’s whole different subject,but Dubai will be dissolved, I guarantee it.
their economy is based on voodoo economics (Capitalism at it’s best)
Their Sheikh Mo has skimmed billion of dollars from “his” country,the country has no accountability laws ,their government is one of the most corrupted in Arab world,I say they deserve it .
What you plant ,you will harvest period.
a dusty mercedes waiting for a new owner, who is next…? just like liquidities in money humans are also flying ,Dubai was never home to the many who went there.Dubai needs to be more tolerant to expatriates rights..it should get sitizenship to those who stay and contribute ..humans are an asset ,would desert dwelers tolerate the demographic change well,they can get arabs ,muslims and alow them to make dubai home…would there masters alow them..?
Once they open Cyclon again and allow Casinos to open all over the place, not only will start booming again, it will be the shining light of the Mid-East.
As for Jordan being the substitute. Jordan had its chance but one thing needs to be done before Jordan tries to take over and that is change crappy people’s attitude and the tribal mentality they have.
Too many big shits there.
I have grown up and lived in Dubai and Abu Dhabi on and off for 30 years, and let me tell you something it has never been a ghost town, it simply cant be, many people seem to forget how Dubai became a business hub for the middle east, it was built brick by brick and through the enhancment of the creek to let bigger trade boats in, it was not an overnight sensation like many westerners seem to think.
For the UAE national and the long term expat who probably wont leave Dubai anytime soon even if they did lose their Job, what is happening is a blessing in disguise, really, the correction in real estate prices to logical levels as well as the overall slowdown of the hyper drive growth is not a bad thing overall, taking a ride around in dubai these days is so much more pleasant for example.
Markus – I agree with what you’re saying. A correction was/is needed. It will be surely painful and it will probably be protracted (depending on AD’s degree of intervention), but Dubai will recover. Let’s just hope that they learn and stop with the excessive nonsense.
What happened is a lesson to all banking people, no matter how risk management draws graphs and tables and ratios to increase credit appetites, with pooling groups, tiering, hedging, financing and
re-financing, issuing, and double booking ( a credit for another ).. The very classic economy always prevails in terms of production and relative finance market covering that production. The world might feel more inclined to abide by regulations, margins, securities and focus on macro economy in this time, especially in a region like ours.
I feel sorry for all the bail-out plans being approved, at least for ours in Jordan. If we can issue 200 million JDs through treassury bills, why waist them on real estate that got us more or less to the current state of transition, as Jordan is reflexing to a barely existing cause. Why not invest those 200 million JDs in sectors needed for locals, appointing locals, that will strengthen local economy such as water and agriculture when possible opportunities to raise investments from abroad are more likely to be on hold for the current year?
This is a good chance to get some good wheels in motion, hope it won’t be wasted.
Dubai miracle…my potato
you guys it’s all over in Dubai,oil is already running out the Moshkiedom is riddled with billions of Dolores in debts,most of it’s population are foreigner with no citizen rights,human rights abuses are rampant,corruption is wide spread,and the so called lassie fair economics is just utter failures,it’s is a American/British protectorate , no manufacturing base whatsoever,most people who moved to Dubai have no sense of belonging and the country has one of the most corrupted family in the region.
IT IS ALL OVER ,Future will prove my point.
A year ago, with oil prices heading toward US$200 a barrel, few dared question property prices in the United Arab Emirates. Now, there is evidence they “fell off a cliff†as banks reduced lending and speculators withdrew amid the worsening global crisis, Mai Attia, a Morgan Stanley analyst based in the sheikdom, said in a January 30 report.
I’ve always dreamed of working in Dubai,my first plan at graduation,buying a one way ticket…
looking up all my connections!and find the job to get you settled
to tell you the truth i see Dubai,as a small US OF A,the us was formed with armature entrepreneurs who were ready to leave everything for a dream!and with there own hands they made that dream come true…
every single thing in life has a cycle,has growth,peak,decline…but the cycle does it end?
it’s always up to the people,never the oil,never the system,never the money!!!
and i do put high hopes on these people,because they’ve given up alot in there homeland,i don’t think it’s for nothing..they won’t just let go easily!
Naseem,thnx for the great blog doses man 🙂
Alurdunialhurr,
I don’t share your pessimistic view of capitalism generally, but Dubai really was a bubble that never made much economic sense. I agree with your assessment. Adios, UAE!
“What happened is a lesson to all banking people, no matter how risk management draws graphs and tables and ratios to increase credit appetites, with pooling groups, tiering, hedging, financing and
re-financing, issuing, and double booking ( a credit for another ).”
Yes, banking has been and should remain a conservative business. In the States we are feeling the heat because the politicos and the bank thought it was a grand idea to grant credit to those who weren’t creditworthy. After all, we had to turn those low-income minorities into the proud owners of houses with marble counter tops somehow!
In the long run (i.e. after the oil is gone), the UAE probably has more promise than most other Gulf States, but it’s going to be a bumpy road until then. Good luck weathering the storm.
“After all, we had to turn those low-income minorities into the proud owners of houses with marble counter tops somehow!”
You are a racist..But let me ask you this: YOu “had” to? So the greed of the banks was charity? Oh wait, them banks are managed by minorities..And those who bought the bundled loans in the secondary markets were also minorities…
I find it really weird how people can turn their back on something right away! say one thing one day and then totally change their opinion the minute the tide turns!
When everything looked happy and danddy Dubai was rated as a smart model, and the vision that all other Gulf states should aspire to. The diversification of their economy made sense to people and everyone wanted to do the same! But now, you hear those same voices questioning Dubai’s route and calling it a salt city that will dissolve! I bet you that at least 70% of those questioning Dubai dreamt about working there, but now it is smarter to go with the flow and pretend to have been smarter!
Those who pointed to Cyclone and Casinos did rightly so because probably this is what they were looking for when they went to Dubai. Or at least this is the message they got from their friends living there. This says nothing about the city’s capability but says a lot about the mentality of those people!
To all those who complain about Dubai’s model, I ask you to name 100 multinational companies that have headquarters in the Middle East, and I assure you that 90 of those will have their headquarters in Dubai. Nobody here mentioned anything about Dubai Internet City, Dubai Media City, Dubai Healthcare City, Jabal Ali Free Zone, or Jabal Ali port “The biggest and the busiest man-made port in the world”. If Dubai was stupid, I don’t think you suggest that all these corporations were as stupid!! Companies like Canon, Siemens, Microsoft, 3M, Dell, i-mate, Schulmberger, GE, Johnson & Johnson, Chrysler, BBC, Forbes, CNN, CNBC, and the list goes on! All these companies have invested to be stationed in Dubai! I don’t think you suggest this is part of your Salt city!?!?
Dubai has problems like every country or city in this world! They have to work out a scheme to help people settle in in bigger numbers. Although I don’t agree with the idea of no belonging! A lot of Europeans, Asians and Arabs plan to stay here for years to come because of the lifestyle, the opportunities and the safety and openness this city provides!
And talking about corrupted regimes!! I really don’t understand where did the gentleman get the idea that the UAE’s regime is one of the most corrupted in the Arab world?! Who are you comparing it to? Egypt, Lebanon, KSA, Yemen, Iraq, Syria, Libya, Tunisia, …etc? Whic countries exactly are you comparing it to? If what you say is true, I would love to have a “corrupted” government in my country that will provide me with such a high standard of living that will stop me from being an “expact” looking for a future for myself and my family outside my country!
And about Jordan benefiting!! I really don’t see how?!?! Those hundreds of thousands working abroad in UAE and other Gulf states will go back to jordan with their tails between their legs driving inflation with their temporary money just like the wave from Kuwait and Iraq did! We simply don’t have the infrastructure or the mentality to be an alternative!! If anybody is going to be an alternative it will be Qatar or Abu Dhabi! WE’ll just sit and continue what we do best!! Complain and rain on other’s parades!! I think we got addicted to the fact that every disaster that happens in the neighboring countries ends up beneifiting us for “awhile” just like what happened in Iraq and Kuwait! And the truth is that we get screwed eventually!
What happened in Dubai is a result of a global situation that affected every country! I don’t see anyone calling Iceland a corrupted country?! The whole country went broke! If this crisis never happened Dubai would’ve stayed the model to follow!
Bottom line is, Dubai will not disappear or become a ghost town “Which is not currently the case as some would like to suggest”. It will slow down, just like every other place. They will definitely go slower in their development plans. It will have some problems that they will have to sort out. But once this crisis is past us, the same people who cursed the City and its system would go back to wishing they were there!
They dared and they got rewarded. and now they suffer a bit like everyone else! At least they dared. In other places in this Arab world we suffered from the moment we became helpless and useless countries, and we’ll continue doing so for as long as we have this pathetic mentality!
Nas – Given this post, I think you’ll find this interesting:
Here is for you, Mohanned.
No, the generosity of the government toward minorities was charity, and it is precisely what allowed greedy bankers to do what they did.
But the banks can’t win, can they? They were accused of being too greedy when they didn’t give enough money to low-income minorities. “Redlining!” the liberals used to scream. Now they’ve foolishly reversed themselves. “Predatory lending!” is the battle-cry of liberals now.
That’s a major difference between leftists and conservatives (well, okay, old-fashioned conservatives, and not semi-liberal multiculturalists like Bush and Rove): conservatives realize greed is pretty much a constant factor in human nature. It isn’t necessarily a good thing, but it isn’t going away any time soon. Any given individual may be more or less greedy at any point in his or her life, and any given individual may be more or less greedy than another, but collectively greed is a constant. Therefore, greed isn’t much of an explanation in itself for large scale phenomena. The folks on Wall Street were as greedy in 1960 as they were in 2000 and as greedy in 2000 they will be in 2040. The housing crisis didn’t happen in 1960 or 2040, it happened now. What changes isn’t the amount of greed, but the ability of the greedy to do what they will. Liberals don’t grasp that, and that is why the are always resorting the explanation of “Greed!” as an answer to the very problems they worked so hard to create.
If you want to understand the roots of the housing crisis in the United States, I recommend reading every story tagged ‘real estate’ at the blog to which I just linked. There are many, many pages of illuminating–sometimes quite funny–posts on the topic.
Al these company you listed ,just give them six months ,they will be leaving in no time,or I should say they will dissolve their company from Dubai pretty soon ,
What is this “smart Model” you talking about Ehab
“will Dubai’s loss end up being Jordan’s gain?”
Possibly. After all, Jordan is built on the misery of others….
Alurdunialhurr.. I rest my case. If they will resort to the option you are talking about then any future talk of strategic planning and corporate thinking is a lie!! hundreds of companies came to dubai based on some stars’ reading and no studies whatsoever!?
If Dubai is going to dissovle, I and you should start worrying about people in jordan and the rest of the other arab world because they will bite the dust! If after all these investments in infrastructure the city will disappear, it would be a lot easier for places like Lebanon, syria and egypt to turn into dust! They have been covered with it for so long anyways.
I think we deserved Saudi in the eighties!! Because now, we are cursing the very city that gave opportunities to thousands of us which we will otherwise only dream of!!
Dubai is a bubble and things will be slowing down there but not to an end. After all this is a rich Gulf state. Too bad for the poor employees who spend most of their income on small Studio apartments and fail to do any savings. I checked with my friends there and as much as people are let go, companies are still hiring in Dubai. This will affect the Jordanian market when you have more employees avaiable to work in a very small job market, only the experienced and the previliage will be able to find work.
I already knew that I was talking to a “true” conservative.. The debate of conservatisism vs. liberalism has been going on for so long that we can’t solve it in post or a comment.. But since you directed me to a “conservative” book, I suggest you read Paul Krugman’s Conscience of a Liberal.
Bit I really appreciate that you took the time to reply.
“I think we deserved Saudi in the eighties!! Because now, we are cursing the very city that gave opportunities to thousands of us which we will otherwise only dream of!!”
Ehab,,
“opportunities to thousands of us “, tell that to the people of South Asia (Pakistanis, Bangladeshi Indian ans serelankans about opportunities.
in my opinion in opinions of millions ,it’s called slave labor!
you know what Ehab,,I don’t give a hoot about Dubai or it’s despotic sheikh Mo, they deserve it.
What you plant you harvest! the whole country was build on slave labor and now we are witnessing the collapse and I love it.
Companies in UEA are threatened to keep their employees by state police.
Does anybody still have doubts?
Al urdni: it says UAE nationals layoffs… It does not make sense to fire nationals where expats continue to enjoy their posts. Any reasonable country would do that.
Ahmad,read the article man,foreign companies could not sustain themselves,like they say in Arabic Ahmad,,”if you don’t have it you can’t give it..
Here is another breaking news from Abu Dabi and Dubai.
Enjoy the good news!
Ahmad Al-Sholi says “It does not make sense to fire nationals where expats continue to enjoy their posts.” I think the comment is racist and offensive and would urge Nas, as moderator, to remove it.
Surely it would make more sense for a company to keep or fire employees based on ability, productivity and the company’s needs rather than their nationality. It is fine to employ some token Emaratis for quota reasons while times are good. However, when things get bad, I am not sure having “Hamad”s and “Jasem”s running the show is the best way to survive the crisis.
BTW: Yes, I know. The last sentence was probably racist.
its not just dubai, the whole world has been hit by the market slump .. layoffs and shrinking economies are a global thing .. so i think maybe we are over-reacting .. when they default on their debt, then we can sound the alarm
@ al urdni, if a company can not sustain itself and is dissolving, they don’t really care about labor regulations or threats thereof.
@ ibby, when a discussion about nationals priority to obtain jobs over xpats.. there is a solid unspoken conscience that individuals match theoretically in all requirements, potential, and qualification (say university graduates hired by a centralized operations bank processing transfers, which is considered a bulk employing tank that requires basic qualification of a bank staff. Say construction workers which might be only qualified for their physical abilities) or a much senior/advanced hires with different criteria. When individuals match, priority is given to the national. Some countries do it by force as the case may be in dubai, others do it by facilities and tax exemptions, others just wish for but the outspoken ones in their societies are well founded to block any action or even not to be accountable for doing nothing also. Any government tries to deliver welfare to its people and thats why priority is given to nationals. As a Jordanian yourself, would you like to see a foreigner enjoying benefits in Jordan more than you do for any justification?
You accuse me of racism but identify yours as well. whats that? humor?!
The amount of ignorant dictating people in every discussion sickens me.
@ Ahmad Al-Sholi: A company faced with two candidates who are both perfect for a position will often choose the candidate who is a better cultural fit. I am not sure why nationality has to come into this.
As for benefits for national (in any country), I agree with you in that the government tries to deliver welfare. If the government is advertising for jobs at the Ministry of Finance for instance, let them only hire locals.The government may also pay locals social security, housing and transport benefits which are obviously not available to expats. This is how governments help their citizens. I believe that companies must be free to hire and fire individuals as they see fit.
I am not Jordanian, by the way. But I see your question. If my government was handing out things for free, I would only want my fellow citizens to get these things. However, working to earn a living is not a “benefit”. Surely if a company found qualified, able and willing locals they would not have to go to far flung places looking for people.
How many Emarati men do you know? How many of these guys are happy to be paid $50 a month to work on the construction sites you mention? How many would be happy to sweep the streets, pick up rubbish at 5 in the morning or serve you when you go to Starbucks?
Dear Urdun,
Having been traveling regional a lot in the last few weeks on business, I have to admit that I find Jordan’s market to be quite better in coping with the world crisis than the likes of Dubai (and oh yeah….Dubai’s going through a nuclear economic meltdown). I have to point out, in my singularly humble opinion, that perhaps now is the time for another ‘giant’ to awaken in the region. It is not a mere issue of financial base that would kick start an d ambitious and healthy growth curve, but rather, the ‘Will Power’ to drive our ideas, creativity, and spirit to evolve culturally, economically, and politically.
Despite bits and pieces of isolated imperfections, it does breed a sense of pride when you see Jordanian innovations and master products being marketed globally. I think it’s a about time the likes of “Blue Fig†to start developing foreign outlets. or now that “Fine†tissue paper is literally on every table in every country of the Middle East, why not start developing the first tissue / toilet paper in the International Space Station?
From Books@Cafe, to Falafel Abo Jbara, to argeelet Tche-Tche….we are “ahl el-azmâ€â€¦.and we have yet a long way to go….Hence, on we go ya Urdun ! regardless of what happens to Dubai…we have a homework to do.
Dragon of the 7th Circle
@ Ibby: a government would constrain hiring regulations as it should to ensure that open business environment contributes to its economy, in one aspect of that would be employment ratio, saving and investment capabilities, retail market segmentation, accumulation of knowledge and experience to further build on. On a governmental perspective, its one of a national security measures. And please keep in mind that assumption involves symmetrical profiles of national and xpat candidates.
The problem of nationals in any country not engaging in some activities while having unemployment exposes a social problem. If they hire foreigners in certain sectors being fully employed themselves or well off that they do not need to work in regular jobs or being paid just for being nationals of that country, they would be highly well managed.
I think that the main conflict would be how businesses are viewed, and when borders or lines are drawn for aspirations and needs that are socially higher concerns. the point / the motive / the goal after all is what sets priorities
.
A superpower on any level simply has larger and more visible falls. The same stock market crash percentage can mean nothing in country A and mean the world in country B.
The scale in question when you talk about Dubai is very much like noitwillnot put it; not isolated and not dead.
It is afterall one emirate with its neighbors very much able to help keep some sort of liquidity and employment available.
Not for foreign workers as much, that part is very true.
My dad just got laid off a major project over there. Obviously they hit the more expensive foreign talent first.
It’s far from over for Dubai though.
If that sort of unemployment is freaking you out, please take a peak at Florida’s unemplyment stats alone, and you’ll see that Dubai is relatively doing just great!
I think the key to Dubai’s future lies in its shedding of arrogance. Here are a few examples to ponder:
1. They invested heavily on iris scan systems and software and swung it into action but do not have an effective physical border management plan. When dreams crashed people left Dubai through the Oman border..
2. The government’s support for blank check guarantee requirement by banks for loans etc. The moment your employer notifies the bank due to the commitment they have entered into when they gave the salary certificate, the bank immediately cashes your guarantee check, it bounces and they submit it to police where it instantly becomes a case and a record on the exit system. If you try to leave the country you get arrested at immigration.. now examine this. This is a country that does not grant you citizenship or benefits, you have lost your job and are unable to find another one due to the crash in the inflated economy of Dubai… and you are supposed to be in jail?? Imagine if an Emarati is put through this. This naturally has people thinking “me, me” and not “country, country, Dubai..” as this is how it could end up for anybody doing a decent job!
3. The government knows that thousands of laborers are being sent home, visa cancelled and off they go with the clothes they wore to work that day. Most companies, almost all to put it square continue to take advantage of this and ship the very employees that earned the bread for them minus months of outstanding pay and benefits… where is justice here?
4. They say it is tax free here, wait a minute! In a land where you are taxed, they allow you to make your money and then tax you based on your earnings whereas in Dubai they tax and choke you upfront and leave you to survive on remaining liquidity. The licenses, fees, rent, hidden fees, all this adds up big time and most people do not see this unless they have been through it.
The authorities are so heavy handed and there is hardly sensitivity towards people’s needs here in Dubai and the other states. Try opening a business in UAQ or some place and see!! On the flip side, countries like the US have a system that is fair for the most part. You loose your job you get unemployment benefits so who cares about the unemployment rate someone has written here about? You loose your job here in Dubai, you risk being shoved in jail – like a criminal.
Ahh dudes
this information is helping me alot 🙂
but how will dubai survive when all the oil is gone?
alot of wealthy people scared to live there!! It’s lonely, sad, populationless, ghost town, beautiful city, recession, emptyness. Why?
because we have people breaking ancient tradition of bible or koran. now, you can’t go back and fix it they way it was. what works is shrinkage population in dubai.
Good news is. there’s free healthcare and free cars on airport.