Lingering debt woes from last boom and bust should dissuade risk of runaway spending
Dubai has rediscovered its appetite for grand designs. A replica Taj Mahal four times bigger than the original, the world's biggest Ferris wheel, several new mega-malls, and over 100 new hotels are amongst a raft of extravagant projects aiming to boost tourism in the emirate. But lingering debt woes from its last boom-and-bust cycle should hopefully reduce the risk of runaway spending.
The strategy isn't quite a repeat of the one that led the emirate to the verge of bankruptcy in 2009, when Dubai was left hanging by a debt-fuelled real estate bubble and a series of high-profile overseas acquisitions at aggressive valuations. The economic fundamentals have improved. While residential and commercial real-estate prices remain well below their peak, there is room for new investment in retail and tourism. Hotel occupancy rates were at 90 percent last year, says Ernst and Young. Shopping malls in central areas are packed. New Bollywood theme parks and an expansion of giant Chinese malls will support the emirate's push to woo more visitors from Asia and further align its economy to fast growth markets to the east.
Dubai is drawing on its relative strength in infrastructure and as a regional safe-haven. The city-state currently enjoys around 10m foreign visitors in a year, five times its population. Tourist numbers could grow substantially if Dubai can convince a larger chunk of the 58m
Yet Dubai has said little about how it will fund its bold endeavours. That's a sensitive issue. Lenders to flagship conglomerate Dubai World and property developer Nakheel have been promised 100 percent repayment of their loans but have to wait until at least 2015 to get any money back as part of a multi-billion restructuring plan contingent on asset sales which are yet to materialise.
Dubai as a sovereign only raised US$1.25bn in public debt markets last year. The island project featuring the giant Ferris wheel will alone cost US$1.6bn. Local banks are already overexposed to government-related entities. It is also unclear how readily foreign ones will lend directly to firms like Meraas Holding, owned directly by the ruler of Dubai and dubbed by analysts as "the new Nakheel" because of the multiple mandates it has won. Royal ownership, after all, provided little protection to those that loaned billions to Dubai Holding.
The region can ill afford another boom and bust. Unless memories are short, lender restraint may help prevent that this time round.
* By Una Galani for Reuters
Hope Dubai has learnt it's lessons from the 2009 debacle. its nice to have a grandiose plans and superb execution of the projects. the fact of the matter is the sustanability of these projects. Secondly Dubai has a lot of competition now from other continents like the Americas & Europe. who were never flexible. Now the visa rules have been relaxed and they too want their pie in tourism. they are very flexible in all ways to boost their economy.
Thirdly Dubai should think of holding on to the tourists for a week with nice attractions than the hotels and shopping malls. the fact of the matter is how many times you can go to the shopping malls to kill time. its high time they think of a clear demarcation otherwise its not gonna work. shopping in Dubai has lost its charm since most of the brands are available in India and china with a better pricing. it should be a well thought plan. I stayed in the Emirates for 3 years and i love Dubai. i wish all the best and success to his highness.
some of these grand plans is not feasible.
Why other island, there are plenty on "the World"..
or this is just to draw attention....
Shopping in Dubai is expensive outing.
As A. Holla said most of the brands now are available in India and China with better pricing.
It seem Dubai are returning to the old way.. which lead them to the crisis of 2009.. why following the same route ?
The World is not directly connected to the mainland; the island project is. It's positioned in an area of great demand and will be very successful.
Dubai Mall had more visitors last year than Manhattan. Shopping prices are high, but tourists gladly pay. Who's to say they are wrong?
With hope, the economy will redevelop its fast pace and ingenuity with an underlying air of caution and consideration to help it achieve the status it deserves in the next ten years.
I have been a great admirer of Dubai for quite some time, I was quite concerned when Dubai went into trouble,but I surely believed that it will bounce back. Now they should be very careful that past mistakes are not repeated,I wish sh k. Mohammad all the best wishes and to the people of Dubai.