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Letter from Dubai

The glitzy, puffed-up peacock of the Middle East is imploding. Don’t gloat.

By Chris Wright
December 6, 2009

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DUBAI - One day last month, I was sitting in a cafe on the Dubai Creek with a locally based architect, talking about the traffic. A year ago, this conversation would likely have taken place via cellphone, with one of us explaining that we’re running a little late - which, given the state of Dubai’s roads back then, could have meant anywhere from an hour to a couple of days. On that afternoon, though, whoosh: barely a tap on the brakes.

“Well, if you build a new road every time there’s a traffic jam,” the architect said, sipping his tea, “sooner or later you won’t have any traffic jams.”

He was only half joking. In the last few years, Dubai has built two new bridges, one new tunnel, and scores of multilane highways. Then there’s the new Metro system, which cost $7.6 billion to build, or about $100 million for every kilometer of elevated track. So, yes, the traffic’s much better. It’s gotten even lighter in recent months, as thousands of expats have fled to escape Dubai’s tanking economy.

And this was before the current Dubai World bond-payment debacle, which has made the city the toast of the global finance community - emphasis on “toast.”

In a very real sense, Dubai has been the architect of its own demise. Over the last decade or so, the city’s ruling elite has operated under the principle that there’s no challenge that can’t be met if you throw enough money at it. At times, this approach has worked well - Dubai, remember, solved its hideous traffic problem in less time than it takes your average US city to fix a pothole. But things got out of hand. Having an indoor ski slope wasn’t enough, nor was being home to the world’s tallest building: Dubai had to have an even taller building, a theme park three times the size of Manhattan. Something had to give.

And give it did. In late November, the massive state-owned conglomerate Dubai World indicated that it might not be able to meet payments due on its $60 billion debt, which is a bit like driving to your landlord’s house in a Porsche and telling him you might not be able to pay the rent. The news sparked panic in world markets, with some suggesting that a deadbeat Dubai could trigger a second wave of global recession. Already, there were plenty of people eager to pick a fight with this supersized show-off of a city, and now they had something to sink their teeth into. “Bling Central,” as a British broadsheet put it, “threatens to drag the rest of us down with it.”

It’s a cruel irony: So eager for international headlines when the going was good, Dubai’s leaders are now the talk of the town. And what the town has to say is this: Idiots.

This may be the prevailing sentiment now, but it is not entirely fair. While Dubai may have blundered over the line between can-do spirit and overreaching ambition, we shouldn’t forget what a remarkable feat the city represents. Two decades ago, this sprawling metropolis was a dusty little trading town, sitting on the tail end of the Arabian Peninsula, one of the most inhospitable spots on the planet. What Dubai’s rulers have done, in effect, is to create life under laboratory conditions, leapfrogging evolution and snubbing the laws of exigency in the process. Sure, these days the plotline is starting to resemble “Frankenstein” rather than “Utopia,” but you have to give these guys credit for trying.

Many people, even in Dubai, would likely hoot at the idea they deserve any credit at all. While public criticism of the authorities here has been relatively muted - which is understandable, given that you can face criminal charges for disparaging the ruling Maktoum family - private criticism is rife. This is especially true of the thousands of expatriates living here. Mostly, the discontent expresses itself in gallows humor: Idle bankers at the now desolate Dubai International Finance Center, for instance, have taken to calling it the Dubai International Food Court. Occasionally, though, the talk takes an ugly, conspiratorial turn: We’re living in a police state. They’re going to throw us all in jail. They want us out.

Even before the implosion of Dubai World - “Dubai’s flag bearer in global investments” - the expat community here was feeling the pinch. Dubai has long attracted talent from abroad by promising a millionaire lifestyle for people on a budget: endless sun, cocktails on the beach, a doorman to wave jauntily as you enter your swimming pool-equipped home. But last year’s global economic meltdown hit the city hard, and many mock-millionaires were wiped out. People who had signed post-dated checks for school fees and rent, or who had swiped their credit cards at Ikea and Al-Futtaim Motors, faced criminal prosecution. Many of these people simply ran away.

As the city falls further into debt, a new and ominous breed of speculation has started to make the rounds. People speak of it only fleetingly, in furtive tones, as if the very words bore some terrible power: “Income tax.” If such a drastic measure were to be implemented, you could expect to see a significant bump in one-way airline travel from Dubai International to Heathrow.

As it is, Dubai’s population is set to drop by as much as 17 percent this year. You can see evidence of this in the scores of “To Let” signs along Sheikh Zayed Road and in the SUVs gathering sand in lots around the city. Many of the cranes dotting the skyline have stopped twirling, including those on three of the four gigantic artificial resort islands being built offshore by Nakheel, the flagship entity of Dubai World. These islands were once touted as the “Eighth Wonder of the World.” They now sit quietly off the coast of the city, obstructing shipping lanes, the sand from which they were formed blowing back into the sea.

It’s unclear if and when work will recommence on these islands - or, for that matter, on the scores of other mega-projects currently on hold. Dubai’s sovereign debt is believed to amount to over $90 billion, considerably more than its current gross domestic product. Abu Dhabi, Dubai’s oil-rich neighboring emirate, isn’t knocking on the door with wads of bailout money, as it has done in the past. Foreign investors aren’t falling over themselves to help out either. The city’s rulers have sought to calm nerves over the last week or so, insisting that people have “overreacted” to Dubai World’s troubles, but there’s no getting away from it: We’re in a pickle.

That said, Dubaians are a resilient people, and should never be underestimated in their ability to ignore current events. Expats who haven’t left, or at least those who still have jobs, seem more determined than ever to have a good time. Even the news that Dubai might be singularly responsible for the second scoop of a double-dip global recession hasn’t fazed people too much. The bars and beaches and malls are still full. You still get cut off by Porsche Cayennes and BMW X5s on the city’s roads. The swimming pools are still bluer than blue. Life goes on.

This, anyway, is the expat view of things. We’ll stay here as long as it’s profitable to do so, and when it isn’t we’ll move on. For locals, though, Dubai represents something more than the presence or absence of opportunity.

In the end, the most troubling aspect of Dubai’s dilemma isn’t fiscal - you bounce back from money trouble. People often say that this city is built on sand, but more than this, it’s built on an idea. Dubai likes to see itself as an example of hope triumphing over circumstance. Now that circumstance has made a mockery of this proposition, what’s left? What do you do with all that spoiled pride?

For outsiders, it’s easy to view Dubai as a victim of its own hubris. And, it must be said, the city hasn’t done itself any favors in this regard. When viewed from the air, for instance, part of the configuration of Palm Jebel Ali, one of this city’s ghost islands, spells out a poem in Arabic script. The verse was written by Sheikh Mohammed bin Rashid Al Maktoum, the ruler of Dubai, and it begins: “Take wisdom from the wise./It takes a man of vision to write on water.”

A little over the top, yes, but there’s an argument to be made that this kind of extravagant self-belief is what made Dubai possible in the first place. You’d have to be pretty sure of yourself to think that an unforgiving region like the Middle East could be fertile ground for one of the world’s most prosperous and cosmopolitan cities, and that you could build such a city over the course of a few years. You’d have to be mad to think such a thing. And now that Dubai’s here, for all its faults, you’d have to be mad to wish it away. Compared to its neighbors - the theocracies, the petroleum-fueled oligarchies, the actual police states - it really does represent a kind of fragile victory.

Earlier this year, a magazine I edited ran a cartoon whose joke revolved around one of Dubai’s most enduring cliches: “I remember when this was just sand.” The line is generally uttered by expats while pointing at a skyscraper or shopping mall, and is used to establish their been-here-longer-than-you pedigree. The idea for the cartoon was to have a forlorn-looking local gesturing at an endless expanse of sand dunes, saying: “I remember when this was just buildings.” It doesn’t seem so funny now.

Chris Wright is an editor and writer living in Dubai. He can be reached at chriswrightdubai@hotmail.com.

Correction: Correction: Because of a reporting error, the printed version of this article mischaracterized the relationship of Dubai’s debt to its gross domestic product.