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Dubai has become a synonym for superlatives. The bustling city on the coast of the Persian Gulf emerged into an international business hub and tourist destination in the matter of years. Althoug Dubai’s economy was built on the back of the oil industry, the emirate managed to reduce it’s dependence on oil exports – as Western countries ought to do – to a minimum. Today, revenues from the oil industry account for less than 6% of Dubai’s GDP. When the construction boom set in at the beginning of the new millenium, an incredible numer of unique and creative construction projects drew lots of international attention to the “city of the future”. Some of the highlights: the Burj Al-Arab, Dubai’s best-known landmark, this 7-star hotel is probably the most frequently photographed hotel in the world; the palm-shaped artificial islands; the world’s tallest skyscraper (still under construction), the Burj Dubai.
Dubai has become a financial center for the entire region, is determined to become the #1 air traffic hub as the “Dubai World Central Airport” which is currently under construction will have the largest passenger capacity in the world (120 million a year) and probably the city with the fastest growing skyline.
However, Dubai’s boom has stunned. It really shouldn’t come as a surprise since the emirate’s economy is connected to the world economy even more than other countries’. In recent years, billions and billions of dollars were being invested into ever greater and more exciting projects. Consequently, the city has become the world’s largest construction site. Continously, new skyscrapers have been sprouting out of the ground. The currently tallest skyscraper in the world, the Burj Dubai, was still in the planning stage when property developers were thinking about adding yet another highlight to Dubai’s skyline, a one kilometer (3280 feet) tall tower. Feeling the pressure of an increasing amount of empty office space, a cooling economy, the first budget deficit in ages and falling real estate prices, the rulers of Dubai decided to delay the construction of the “Al Burj”.
Now that Dubai’s growth-obsessed government is scaling back investments, there can be no more doubts about the bad state of the world economy. Hotel occupancy in Dubai is down, financial firms are struggling to survive, oil revenues are down and property developers are over-burdened with credit.
Worries about the financial stability of some propery firms caused investors to withdraw money. Now it’s to be seen whether the government is about to regulate the property and construction sector more tightly. Where the basic idea has been “there are no limits”, authorities are likely to be stricter in the future.
On the one hand, Dubai has accumulated giant cash reserves, so the government has the financial means to step in where necessary, but on the other hand, Dubai’s economy and rulers have to prove themselves in crisis management for the first time in more than a decade.