Rising from the desert sands, seeming to pierce the very heavens above, the Burj Khalifa glimmers under a clear blue sky. Dwarfing the massive skyscrapers that make up the profile of the city skyline, this post-modern jewel towers over the desert oasis that is the city of Dubai.
From the Palm Islands to Dubai World, the man-made islands rising from the waters of the gulf, to the world's tallest skyscraper, the Burj Khalifa, Dubai has been building the dreams of men. But there is trouble in paradise. Dreams are a fleeting and expensive thing. Though Dubai has proven that such wonders can indeed be dragged into reality, more often than not they have to be brought in kicking and screaming.
Dubai World
According to a Bloomberg Press article by Arif Sharif and Laura Cochrane from Nov. 26, 2009 the cost of these projects has been astronomical. Dubai World, a set of man-man islands laid out to look like a satellite view of the entire globe, has some serious financial problems. Dubai said in an email statement that its state controlled Nakheel Company would ask creditors for a standstill agreement so it could extend the maturity of bond dates on the $59 billion worth of liabilites accumulated during the construction boom.
Rachel Ziemba, a senior analyst at New York based Roubini Global Economics, told Bloomberg, "Extending the maturity of Nakheel debt is feeding the market's uncertainty on which debt Dubai will honor in full. They look desperate and the market is concerned that in the long term Dubai’s indebtedness is rising not falling."
So what happened to this desert playground of the super rich?
Dubai has been under a full throttle expansion for quite some time. Massive spending on construction has only seen debt grow and multiply. Fears continue about the country's ability to repay this debt. The main issue is a lack of transparency. Emad Mostaque, an equity-fund manager for Pictet Asset Management Ltd., a London-based fund with $100 billion invested globally, told Bloomberg Press, "There is no clarity about what exactly is happening. They have to clarify if there is going to be a voluntary rollover or if there is going to be a forced rollover. If there is a forced rollover it will mean technical default. If they don’t clear this up then the whole market will want to sell."
Dubai's Financial Rescue
The United Arab Emirates has pledged support for the ailing economy of Dubai. The central bank has put up $10 billion dollars to help ease the mounting fears of Dubai's debt default.
In the article 'UAE Central Bank Moves to Help Dubai' by Alistair Dawber, the details of the rescue financing brought relief. Peter Sands, Britain's Chief of Standard Chartered Bank said, "The UAE central bank has acted decisively and pragmatically in announcing new liquidity measures today. Their support for the banking system will underpin consumer and market confidence in the economy. We are confident that Dubai, and the UAE as a whole, will work through these issues and continue to prosper as a dynamic and vibrant part of the world."
The Burj Khalifa
The problems continue on other fronts. The 2,716.5 ft, $1.5 billion Burj Khalifa, officially opened in January of 2010, has had some growing pains of its own. According to the official website, ticket sales for a chance to take in the view from the 124th floor observation deck are temporarily unavailable due to maintenance. A Feb. 9, 2010 Telegraph.co.uk article by Richard Spencer pin-points the maintenance issue as an electrical problem. "Technical issues with the power supply are being worked on by the main and sub-contractors and the public will be informed upon completion," according to the statement issued by Emaar, the company that built the tower.
The Burj Khalifa is host to offices, residences and the Burj Armani Hotel. Rooms at the Burj Armani Hotel were designed by Giorgio Armani and are filled with furnishings from a special collection by Armani/Casa. 160 rooms and suites occupy several floors, making the Burj Armani Hotel a luxurious destination for those who can afford it.
Shortly after the grand opening of the tower, UAE thrill seekers Nasser Al Neyadi and Omar Alhegelan of the Fazza Sky Team executed the highest building base jump in history from the top of the Burj Khalifa. The jump, officially sanctioned by UAE, Emaar Properties, was a world record vertical descent of 2,205 ft. Mr. Ahmed Al Matrooshi, the Managing Director of UAE, Emaar Properties, told the official Burj Khalifa website that the world record jump, "compliments Burj Khalifa's accomplished track-record of pushing frontiers." Indeed.
The Future of Dubai
On Feb. 9, 2010 CNN reported that Dubai is considering a sale of state property including one of the most famous ships in the world, the QE 2 (The Queen Elizabeth II). The investment arm of the emirate, Istithmar World, is said to be contemplating the sale in a effort to restructure their debt financing. Istithmar World has yet to respond to these rumors.
The Burj Khalifa, Palm Islands and Dubai World are truly spectacular accomplishments. But at what cost? In the FT.com article Dubai Groups Line Up Asian Asset Sales by Sundeep Tucker and Simeon Kerr, it is reported that Dubai based business entities are still advertising to sell assets to help ease continuing debt obligations.
Dubai World is trying to restructure some US$22 billion of debt. Emaar, the company that built the Burj Khalifa, is looking to sell off assets as well. Dubai Holdings is shopping around its 40 per cent share in Malaysia's Bank Islam. While none of the parties involved in these potential transactions would comment, Dubai Holdings has said that there had been a lot of speculation about asset sales but "there is nothing concrete to hand."
The global financial uncertainty of the new millenium continues.
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