$60bn Ajman city project could be delayed

Construction of a $60 billion city in the emirate of Ajman could be slowed, its developer says, in another sign that the global economic crisis is hitting the Middle East's grand development plans.

Al Zorah, a joint venture between Ajman's government and Lebanese developer Solidere International, is designed to be a 12 sq km city of landscaped beaches, homes for 200,000 residents and a giant golf course.

Built on reclaimed land 25 minutes drive from Dubai's airport, the project was launched in May.

But Imad Dana, chief executive of Al Zorah Development Co. said construction could be slowed because investors could hesitate to buy into the project, and the city's planned completion date could be pushed back by two years to 2025.

"With the crisis, there's a lot to think about - you'll think twice before you buy a Starbucks coffee," Dana said at the 2008 MIPIM Asia conference in Hong Kong.

"Sometimes it's good to have a breather," he added. "Now things are back to reality."

Some attempts by the UAE to build its way into a diversified economy, less dependent on oil revenues, are coming unstuck.

The seaside emirate of Dubai shifted into crisis mode this week as its breakneck building boom stalled, its lending bonanza evaporated and the government pondered wider steps to rescue banks.

Big Dubai developers have started firing staff and paring projects, banks such as Emirates NBD have blocked consumer credit to employees of companies at risk and at least one major mortgage company has stopped lending altogether.

Al Zorah, a planned development which is selling building rights, had sold half of its first phase at a minimum investment of $70 million, Dana said.

Investors are a combination of developers and high net worth individuals from Lebanon, Saudi Arabia, Iran, India, Russia, he said, declining to divulge names.

"The crisis hit us when we're not exposed," Dana said. "We're at a peak in terms of cash and will benefit from a drop in production costs. We're okay."

Family-ruled Ajman, with a population of about 300,000, is one of seven emirates in the UAE federation. In a bid to catch up with its neighbours, Ajman is preparing new freehold laws and regulations similar to those in Dubai.

Shares in Solidere, Lebanon's largest company by market value, hit a year low on Thursday. Its A shares fell 7.12 percent to $16.95 on the Beirut bourse and its B shares shed 8.44 percent to end at $16.80. The shares had traded at $40 in July.

The Al Zorah project will have $700 million in cash and proceeds from sales to build infrastructure in the project's initial phase, Mounir Douaidy, Solidere's general manager and Chief Financial Officer, told Reuters in Beirut.

Lebanon's late former Prime Minister Rafik al-Hariri founded Solidere in 1994 to rebuild central Beirut after the 1975-1990 civil war and gave it a monopoly over most of the 1.8 sq km (20 million square feet) that form the centre. (Reuters)