Economy of Dubai
The Economy of Dubai was valued at US$ 46 billion as of 2006. The Late-2000s recession halted the construction boom [1], and as of 2009-11-27 the city could not pay interest of its US$ 59 billion debt[2].
The International Herald Tribune has described it as "centrally-planned free-market capitalism."[3] Although Dubai's economy was built on the back of the oil industry, [4] revenue from petroleum and natural gas currently account for less than 6% of the emirate's gross domestic product. Dubai became important ports of call for Western manufacturers. Most of the new city's banking and financial centres were headquartered in the port area. Dubai maintained its importance as a trade route through the 1970s and 1980s. The city of Dubai has a free trade in gold and until the 1990s was the hub of a "brisk smuggling trade" of gold ingots to India, where gold import was restricted.
Today, Dubai is an important tourist destination (see Tourism in Dubai) and port (Jebel Ali, constructed in the 1970s, has the largest man-made harbour in the world), but is also increasingly developing as a hub for service industries such as IT and finance, with the new Dubai International Financial Centre (DIFC). Transport links are bolstered by its rapidly-expanding Emirates Airline, founded by the government in 1985 and still state-owned; based at Dubai International Airport, it carried over 28 million passengers in fiscal year 2006 and 24 million the year before.
The government has set up industry-specific free zones throughout the city. Dubai Internet City, now combined with Dubai Media City as part of TECOM (Dubai Technology, Electronic Commerce and Media Free Zone Authority) is one such enclave whose members include IT firms such as EMC Corporation, Oracle Corporation, Microsoft, and IBM, and media organisations such as MBC, CNN, Reuters, ARY and AP. Dubai Knowledge Village (KV) ,an education and training hub, is also set up to complement the Free Zone's other two clusters, Dubai Internet City and Dubai Media City, by providing the facilities to train the clusters' future knowledge workers. Dubai Outsourcing Zone is for companies who are involved in outsourcing activities can set up their offices with concessions provided by Dubai Government. Internet access is restricted in most areas of Dubai with a proxy server filtering out sites deemed to be against cultural and religious values of the UAE - this includes any .il (Israeli) domains, and VoIP services are also illegal and usually blocked. However, areas served by TECOM (an internet service provider) are currently not filtered.
Real estate and property
The government's decision to diversify from a trade-based but oil-reliant economy to one that is service- and tourism-oriented has made real estate more valuable, resulting in the property boom from 2004–2006. Construction on a large scale has turned Dubai into one of the fastest-growing cities in the world.
The property boom is largely driven by megaprojects — these are just some of many projects planned for Dubai:
- Off-shore:
- Inland:
The aspirations of the ruling sheikhs are reflected by the ultra-modern architecture of the city. Dubai is home to iconic skyscrapers such as Emirates Towers, which are the 12th and 24th tallest buildings in the world and the Burj-al-Arab hotel, located on its very own island in the Persian Gulf and currently the world's tallest and most expensive hotel.
Emaar Properties is currently constructing what will become the world's tallest structure, the Burj Dubai. The final height of the skyscraper is topped out at 818 m (2,684 ft, with 160 floors. On 20 July 2007, the head of the Council on Tall Buildings and Urban Habitat (CTBUH), Antony Wood, said "We will not classify it as a building until it is complete, clad and at least partially open for business to avoid things like the Ryungyong [sic] project. Taipei 101 is thus officially the world's tallest until that happens. Burj Dubai's neighbour is another behemoth under construction: the world's largest shopping mall — the Dubai Mall.
Also under construction is what is planned to become Dubai's new central business district, named Business Bay. The project, when completed, will feature a phenomenal 500 skyscrapers built around an artificial extension of the existing Dubai Creek.
In February 2005, the construction of Dubai Waterfront was announced, it will be 2½ times the size of Washington, D.C., roughly seven times the size of the island of Manhattan. Dubai Waterfront will be a mix of canals and islands full of hotels and residential areas that will add 800 km (500 miles) of man-made waterfront. It will also contain Al Burj, another one of the tallest buildings in the world.
Dubai has also launched Dubiotech. This is a new park to be targeted at Biotech companies working in pharma, medical fields, genetic research and even biodefense. The aim of this park is to foster the growth of this sector in Dubai and to utilize the region's talent in addressing this rapidly growing sector.
One of Dubai's recent groundbreaking plans is for a 30-story, 200 apartment skyscraper that will slowly rotate at its base, making a 360 degree revolution once a week. The world's first rotating skyscraper is to be in the center of the Dubailand complex and should be completed by 2009.
The International Media Production Zone is a project targeted at creating a hub for printers, publishers, media production companies, and related industry segments. Launched in 2003, the project is scheduled to be completed in 2006.
A new project was announced on May 1 2006 by the authorities. It is named Bawadi and will consist of a 27 billion US-dollar investment intended to increase Dubai's number of hotel rooms by 29,000, doubling it from the current figure offers now. The largest complex will be called "Asia, Asia" and will be the largest hotel in the world with more than 6,500 rooms.
The first villa freehold properties that were occupied by non-UAE nationals were The Meadows, The Springs, and The Lakes (high-end neighbourhoods designed by Emaar Properties, collectively called Emirates Hills).
Expatriates of various nationalities have been pouring capital into Dubai in the past several years, greatly contributing to the city's prosperity. Iranian expatriates alone are estimated to have invested up to $200 billion in Dubai. [5]
Dubai interests have also purchased large amounts of real estate in foreign countries, in particular snapping up trophy properties in global centers like New York and London. Purchases in 2005 included New York's 230 Park Avenue (formerly known as the New York Central Building or the Helmsley Building) and Essex House on Central Park South.
See the Dubai Department of Tourism and Commerce Marketing's list of developments in Dubai for more information.
Construction
Since 2000, Dubai's municipality has initiated a plethora of construction phases and plans across the entire city of Dubai, predominantly in the Mina Seyahi area, located further from Jumeirah, towards Jebel Ali. Many areas of Dubai are dominated by the large number of construction cranes. Construction in Dubai and the UAE in general is a much faster process than in any Western country. This is partly because Dubai construction companies employ many low wage labourers from the Asian subcontinent for up to 12 hours a day, six or seven days a week.
One of the main reasons for the boom in construction in Dubai is its drive to diversify the economy. The Dubai government does not want to depend on its oil reserves which are largely believed to become exhausted by 2010 and, as such, has diversified its economy to attract revenues in the form of expanding commercial and corporate activity. Tourism is also being promoted at a staggering rate with the construction of Dubailand and other projects that include the making of mammoth shopping malls, theme parks, resorts, stadiums and various other tourist attractions.
Another reason for the construction boom is the recent reversal of a law in 2002 that allows non-nationals of the UAE to own property (not land) in Dubai (albeit freehold and 99 year leases are actually sold to people with ownership still remaining with private companies). The larger of the property tycoons are Nakheel Properties and Emaar Properties. In Dubai, demand is currently outstripping supply by a significant margin and is showing no signs of slowing in the near future. Rents have skyrocketed with the recent inflow of professionals and companies from around the world who are attracted by Dubai's no-tax benefits although rises have recently been capped to 7% per annum up to 2007 under a directive from Mohammed bin Rashid Al Maktoum. Legislation in this area is still developing as the property market for foreigners is relatively new.
An article in the Wall Street Journal in Oct. 2009 reported that Dubai's economy, heavily dependent on real estate where prices have fallen 50% in a year, has been badly hit by the global financial crisis unlike its wealthier neighboring emirate, Abu Dhabi. Dubai has $50 billion of debt coming due in the next three years, according to Standard & Poors. But its total debts are estimated to exceed $80 billion.
In another article in Oct. 2009 Reuters reported that one in four homes is vacant in Dubai and a quarter of office space lays empty due to oversupply and additional supply coming onto the market will continue to put pressure on prices, Colliers International said on Wednesday. The property services firm said in a report the emirate will have 340,000 residential units by the end of 2009, with and another 34,300 expected to come online in the next two years. Meanwhile, leasable commercial space is expected to double to six million square metres by 2011, Colliers said. “The survey indicates a market beset with falling demand and oversupply evidenced through increasing vacancy levels and falling take up rates,” it said.
See also
References
- ^ "Driven down by debt, Dubai expats give new meaning to long-stay car park. Business Times Online". Retrieved 2009-11-27.
- ^ http://www.dnaindia.com/world/report_world-economies-assess-fallout-of-dubai-debt-crisis_1317356
- ^ "Pohl, O. (June 28, 2004). Dubai keeps superlatives coming. International Herald Tribune". Retrieved 2007-10-14.
- ^ "Dubai - Overview:", USAToday.com, retrieved 22 July, 2007
- ^ "Import Bill From Dubai $28.7b", Iran Daily, 04 April 2006