FOR years, Dubai has been regarded as a marvel. It has had the most grandiose projects, the most outrageous projects, the most fancy buildings. Everything there has been a celebration of one god – money.
Now it looks like the party is coming to an end.
It is difficult to imagine the Maktoum family, which rules Dubai, going, begging bowl in hand, to the Nahyan clan, the rulers of Abu Dhabi, but that is exactly what the former will have to do if they do not want a sudden collapse to take place.
Dubai has overstretched itself to the extent of around $80 billion; something in the region of $3.5 billion will fall due for repayment in the next few weeks and the emirate has sought an extension of six months. In other words, the cupboard is bare.
Ten years ago, the fantasy projects were not underway, the emirate was doing well financially and serving as a trading post for every kind of deal under the sun. It has always had a laissez-faire attitude towards money and a man who walked into Dubai carrying $1 million in his briefcase never caused any eyebrows to be raised.
But after the grandiose projects began – the world’s tallest building, the creation of an island in the shape of the globe in the ocean and so on – the level of finance that was borrowed reached astronomical proportions. Nobody dared to suggest that Dubai could not pay back the money, everyone was eager to jump on the merry-go-round and grab a piece of the action.
Nobody ever thought it pertinent to point out that Dubai has little oil and that most of its money comes from trade. Nobody thought it relevant to point out that the entire United Arab Emirates is violating one fundamental principle of any country – it spends without a thought but the residents pay no tax.
Given that the whole country was once desert, the entire infrastructure is built on sand. Desalination plants supply water at a big price – but residents pay very little. Electricity is generated at a massive price – but again subsidised. Roads have to be built and rebuilt as they sink into the soft desert sand. In the end where does the money come from?
Ninety-two percent of the oil in the UAE is in Abu Dhabi, the capital, which subsidises the smaller emirates – Ras Al Khaimah, Fujairah, Sharjah, Ajman and Umm Al Quwain – that, together with Dubai, make up the country. The extent of waste can be gauged by one simple fact – there are six, fully functional, international airports in this little dagger-shaped nation – two in Abu Dhabi, and one each in Dubai, Sharjah, Ras Al Khaimah and Fujairah. And a seventh is being planned, in Dubai!
Why does one need that number of international airports in a country which can be navigated by car in a few hours? One can understand if Dubai and Abu Dhabi have an airport apiece; they are not needed anywhere else. Sharjah is just 20 minutes drive from Dubai.
But this is only the first symbol of the gross over-consumption. For years, Dubai has been living beyond its means and the day of reckoning is coming. Unless, of course, the Nahyan clan is willing to come to the rescue and bail out Sheikh Mohammed.