While Dubai remains a haven for super-rich sheikhs, billionaire hedge fund
managers and Russian oligarchs, there is no doubt that it is in crisis.
Arab tycoons wrapped in traditional headscarves sipped fruit juice
cocktails as they watched Russian models twirl in silk dresses. It was the
most exclusive ticket in town, a private catwalk show to which the Middle
East's biggest spenders had been personally invited. But if the smiles at
last week's Dubai fashion event looked more false than usual, it was for a
reason. The net worth of the VIPs in attendance today is a fraction of
what it was six months ago.
A six-year boom that turned sand dunes into a glittering metropolis,
creating the world's tallest building, its biggest shopping mall and, some
say, a shrine to unbridled capitalism, is grinding to a halt.
Dubai, one of seven states that make up the United Arab Emirates (UAE), is
in crisis. So, too, are the western expatriates. Many came here expecting
to make millions in property and to soak up a lavish lifestyle living
alongside footballers, actors and supermodels.
But the real estate bubble that propelled the frenetic expansion of Dubai
on the back of borrowed cash and speculative investment has burst. Many
westerners are being made redundant, or absconding before the Sharia legal
system catches up with them. Half of all the UAE's construction projects,
totalling $582bn, have either been put on hold or cancelled, leaving a
trail of half-built towers on the outskirts of the city stretching into
Among the casualties is the tower Donald Trump promised would be the
ultimate in luxury, a $100bn resort Complex by the beach, and four huge
theme parks and an artificial island developed by the state company
Not all bad news
It is not all bad news for Dubai: the building projects still in play are
almost the equivalent of the U.S. stimulus package. And the city remains a
haven for super-rich sheikhs, billionaire hedge fund managers and Russian
But banks have stopped lending and the stock market has plunged 70 per
cent. Scrape beneath the surface of the fashion parades and VIP parties,
and the evidence of economic slowdown is obvious. Luxury hotels are
three-quarters empty. Shopkeepers in newly built malls are reporting a
drop in sales. In Dubai you expect to see a Ferrari parked beside a
Rolls-Royce. But not, as is the case now, with scruffy 'For Sale' signs
taped to the windows.
Nowhere sums up the fortunes of expatriates in Dubai quite like Palm
Jumeirah, an artificial island fanning out into the Persian Gulf,
populated by residents, including the likes of David Beckham, Michael
Schumacher and even, it is said, Afghanistan's President Hamid Karzai.
At the top of the island stands the Atlantis, a garish $1.5 bn hotel
complex with 1,539 rooms and a whale shark swimming in a million-litre
fish tank. The Atlantis' $20m inauguration celebration, where the world's
A-list celebrities were treated to 1.7 tonnes of lobster and 1,000 bottles
of Veuve Clicquot, was promoted as the world's biggest party.
For Palm residents, it was followed by an equally impressive hangover. The
value of their villas and apartments on the Palm fell by as much as 60 per
cent in just a few months.
"Drink your last cocktail and get out of here," said Sasha Reynolds, a
33-year-old cabin attendant. "My boyfriend is an engineer and work has
Dried up. He's been offered work in Qatar, but who wants to go there?
"People are still making money here but the parties aren't quite the same.
I'm lucky — I didn't buy."
The exact number of unemployed is not known. The Dubai government does not
release figures, and prevents the press from running stories that damage
the economy, such as articles about mass redundancies. But there were
sacked expatriates — bankers, lawyers and architects — in all but one of
the hotel bars visited in Dubai this week.
Employees who lose work in the UAE automatically have their visa
rescinded, generally giving them 30 days to leave. "I look out of my
Balcony every day and I see Brits by the pool on their laptops," said
Andrew Hillocks, 29, a sacked telecoms consultant whose passport has been
seized. He will be escorted to the airport this coming week. "They're
looking for work that just isn't there. I sold my car to cover my loan,
but other people are panicking," he added.
Under Dubai's strict legal code, defaulting on debt or bouncing a cheque
is punishable with jail. Any expatriate in financial difficulty knows the
safest bet is to take the next outbound flight. At the airport, hundreds
of cars have apparently been abandoned in recent weeks. Keys are left in
the ignition, with maxed-out credit cards and apology letters in the glove
Officials put the number of vehicles at 11. "No one believes that. There
are 11 cars abandoned just on my street," said Anne, 26, a fashion editor
from London. "Over the past two months, I've been getting an email a day
from people trying to sell their stuff. 'New Jaguar — need to sell before
the end of the week'."
In a world of self-made millionaires and property entrepreneurs, some
remain bullish. Simon Murphy, 42, runs the exclusive Crest of Dubai social
club for Palm residents. "My job is to keep people smiling," he said.
The former hedge fund adviser's apartment is a "boy's paradise." Beside
the snooker table and darts board are photos of him beside Richard
Branson, Alan Shearer and Pele.
"I have the beach there. My local is that bar a couple of yards away.
That's the pier where they're going to dock the QE2. People ask about the
whole 'living the dream' scenario? Ain't this it?"
Some people had to lose out, he said. "As they say: eagles fly with
eagles. The motivating factor to come here is greed. You have to be
selfish, have minimal social responsibility, and want to make money quick.
Brits in Dubai are gamblers. It's the nature of the beast that not
In Dubai however, the losers are the invisible majority. Taxi drivers from
Egypt, Yemen and Iraq compete for work. Their clients often ask to go to
hotel bars where, at night, they will find women from eastern Europe,
Africa and Asia. Expatriates from the developing world maintained Dubai's
orgy of consumption during the boom years. Now they too are being forced
Perhaps those who suffer the most are the construction workers from the
Indian subcontinent, who have carried out perilous work on building sites
earning as little as £70 a month. The Indian embassy is reportedly
Anticipating an exodus, with 20,000 seats on flights to India already
"bulk-booked" for next month.
Buses come to pick up 250 workers every night from one dusty street on the
edge of Sonapur, a labour camp on the edge of the desert. As night falls,
the gangly silhouettes of construction workers file out of the camp gates.
"There is no work," said Jasvinder Singh, 24, placing his suitcase in a
pick-up truck, the words "Dubai to Delhi" taped to the side. "It has been
such a drama. We came here to earn money. We are going home to see our
wives but our pockets are empty."
Sanjit, 44, another construction worker from Punjab, gestured angrily in
The air: "We were treated badly here. We were slaves to the Arabs." But
unlike their British counterparts, construction workers from India,
Bangladesh and Pakistan cannot abandon lives in the glove compartment of a
4x4. Most took loans to pay agent fees to come to Dubai, and their debts
will follow them home.
"I sold our land and took loans in the village to come here," said Imran
Hassan, a 20-year-old Bangladeshi farmer. "I paid the agent £2,000 to
bring me. He said I would earn 1,500 dirham [£287] a month, but we are
paid 572 dirham. When I return people in the village will want their money
but I have none."
A Welsh construction site manager said he had protested to his boss about
the treatment of labourers. "We tell them to bring their clothes to work
one day and then we send them home. It makes me feel sick. I asked why it
had to be done so quickly and I was told a lot of them commit suicide and
we don't want that on our hands."
Dubai's future will actually be decided well away from the shimmering
skyscrapers. To find out why, you need to drive along 90 miles south along
the Gulf coastline, past tiny Bedouin enclaves and shimmering desert
Abu Dhabi, the oil-rich capital of the UAE and the richest emirate, has
Opted for a more conservative and, some say, prudent approach to growth
that contrasts with Dubai's giddy expansion. But it boasts 95 per cent of
the UAE's oil reserves and more than half of its GDP, and regional experts
predict it will overtake Dubai as the destination of choice for westerners
in the Middle East.
Dubai, which has barely a trickle of oil in comparison, is projecting a 42
per cent increase in public spending on infrastructure projects, to
compensate for vanishing private investment. But it cannot go it alone.
Abu Dhabi is increasingly expected to bail out its poorer neighbour, and
the two ruling families are meeting regularly to decide how to transfer
cash into Dubai's ailing economy. "The question is not if Abu Dhabi will
Come to the rescue, but how big it will be and how public," a source with
knowledge of the negotiations said. "Abu Dhabi cannot let Dubai sink."
But Abu Dhabi has its own problems. The emirate's sovereign wealth fund —
once said to be worth $1 trillion — has taken a hit in the global
recession, while the lifeblood of the economy, the price of oil, is down
more than 60 per cent.
Thirty miles from the capital, dust rises from the barren horizon where a
six-mile-long building site is being turned into al-Raha Beach, an $18bn
waterfront city, a joint venture between Aldar, Abu Dhabi's largest
property developer, and Laing O'Rourke, the U.K.'s largest construction
"A lot of staff have been moved over here from Dubai," said Paul, 35, a
Laing O'Rourke project manager, raising his voice over the noise of JCBs.
But it is all coming to a stop here too. There are mass redundancies now.
We've gone from an expat workforce of about 1,000 to about 400. There are
more waves of redundancies coming this week." He said he could not be
sure, but by his estimate more than half of al-Raha development had been
"I've not been made redundant myself but I've decided to go home in April.
The wife and kids have already left. A lot of people are jumping ship
before there are no lifeboats left."
Back in Dubai, a Mercedes Benz snaked along the city's main street, Sheikh
Zayed Road. Firas Darwish, 35, an Emirati property magnate dressed in
traditional Arabic clothing, sat in the driver's seat, listening as
Veronica Chapman, 65, a real estate agent from the U.K., recalled what the
city was like when she first arrived in 1980. "No milk, no bread, no
schools. It was a desert and a couple of buildings," she said.
Darwish slowed the car to point out abandoned building sites where cranes
stood still in the baking heat. "Here we are completely reliant on
Foreigners," he said. "Maybe Dubai grew too fast."