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Good-bye to Dubai

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Matthias Seifert/Reuters
The Palm Jumeirah in Dubai, with the Hotel Atlantis in the foreground, December 2009

In mid-May, with Dubai reeling from the effects of the global financial crisis, I flew into town and took a taxi down the Sheikh Zayed Road, Dubai’s main thoroughfare, which runs parallel to the Persian Gulf. The evening rush hour had not ended, but the road was clear of traffic; during previous visits to Dubai I’d encountered gridlock day and night all along this highway. As we approached downtown Dubai, we ran a long gauntlet of illuminated skyscrapers, all built during the past few years. Covered with garish architectural flourishes, many were unfinished, with exposed steel girders and cranes frozen above them; almost all displayed TO LET signs in their windows.

Just beyond this cluster I could see the Burj Khalifa, a tapering cylinder of aluminum and glass that rises 2,500 feet above the city—the tallest skyscraper in the world. Emaar, the government-owned real estate empire that built it, had conferred upon it the slogan “I am the power that lifts the world’s head proudly skyward, surpassing limits and expectations.” But the Burj will also be linked forever to Dubai’s recent setbacks. The tower was originally called the Burj Dubai, but the name had been changed before its January 2010 opening to honor the president of the United Arab Emirates and emir of Abu Dhabi, Sheikh Khalifa bin Zayed al-Nahyan. Dubai, with a population of some two million people, is one of the seven federated emirates on the Persian Gulf, each run by a sheikh, and oil-rich Abu Dhabi is Dubai’s largest neighbor. Its sheikh had come to Dubai’s rescue last year with a total of $25 billion in emergency loans. “Sheikh Khalifa saved Dubai,” my taxi driver, a Pakistani, told me; but still “many people have been forced to leave,” he said. “The situation is very bad.”

We turned off Sheikh Zayed Road and entered Jumeirah, one of the city’s oldest and richest neighborhoods, the land of “Jumeirah Janes,” the emirate’s wealthy expatriates. Here were villas hidden behind high walls—including the late Benazir Bhutto’s home in exile—and quiet lanes lined with date palm trees. Just off the beach, the Burj al-Arab, a white, sail-shaped hotel, rose on a small artificial island, with $30,000-a-night suites, a fifty-sixth-floor helicopter pad, and Rolls-Royces shuttling guests down the causeway to the hotel entrance. Its image is much used to promote Dubai. When the hotel opened, in 1999, the Guardian‘s architecture critic described it as “fabulous, hideous, and the very pinnacle of tackiness—like Vegas after a serious, no-expense-spared, sheik-over.” The world’s only “seven-star hotel”—which reportedly has never made a profit—competes with several other hugely expensive hotel-resorts, many of them now short of customers.

My destination was far more modest: an $80-a-night bed-and-breakfast near Jumeirah Beach. Dubai’s sheikhs have discouraged such guesthouses, apparently to divert foreign visitors to its pricey resorts. But the owners had managed to stay in business by cultivating a powerful patron in Dubai’s ruling family. “We should be able to operate for the next five years,” I was told by the co-owner, a South African, who predicted that her business would grow as Dubai downsized its ambitions. She led me to an outdoor bar, where a dozen expatriates were downing shots of aquavit, tequila, and vodka at a birthday party.

The partygoers, well into their third hour of boozing, seemed to be typical of the Western set in Dubai: a Russian couple who had left Moscow a decade ago and had built successful careers planning “events” for property openings; a thirty-seven-year-old English ad man whose marriage had collapsed and who was cruising the nightclubs in Dubai’s Creek neighborhood in a search for female companionship. The birthday boy, a half-British, half- Palestinian Christian, was selling condominiums for a real estate firm.

He admitted that he was an endangered species. At the peak of the bubble, in 2007, he told me, “about twenty-five hundred” property brokerage firms had operated in Dubai. Many of these firms had collapsed when property prices began to plummet in late 2008. Now, he said, only a few hundred such companies were left. He and his twenty-four-year-old British girlfriend lived in a condo on one of the “fronds” of Palm Jumeirah—a configuration of artificial islands shaped like a palm tree, and the only one of three Palm projects to be completed—and prided themselves on having survived the shakeout. Dozens of acquaintances had lost their jobs, had their visas revoked, and been forced to leave. An unfortunate few had been thrown in jail for failing to pay their debts. “It’s the survival of the fittest now,” he told me.

Deserted highways, empty hotel rooms, miles of unsold residential and office space. These were not the images that Sheikh Mohammed bin Rashid al-Makhtoum, Dubai’s ruler, had in mind when he wrote his book about the emirate, My Vision: Challenges in the Race for Excellence, which was published in April 2006. “Dubai’s proving to be one of the most successful development stories in the world, and is being viewed increasingly in the Arab and Muslim worlds as a source of pride,” a gushing press release issued by the publisher declared. In the book, al-Makhtoum explained how Dubai had been transformed in the course of two generations from a desert backwater into the ultimate global city. He compared Dubai to Córdoba, the medieval capital of Arab Spain, and praised its melting pot of nations and creeds that enhanced, the release proclaimed, “human interaction and understanding.”

There was always much hokum in al-Makhtoum’s vision—a sense that his edifice was as fragile as the dredged sand on which the Palms and the project called the World—260 artificial islands shaped like the globe—were constructed. Built on the easy cash of foreign lenders, Dubai has purveyed a bland, everywhere-and-nowhere culture, spiced up with gaudy theme-park attractions that defy the desert environment: elaborate water parks, dolphin petting zoos, gigantic shopping malls done in faux medieval Arabian style. One of the emirate’s most popular novelties is Ski Dubai, a fake Alpine wonderland, complete with snow-dusted pine trees and an après-ski restaurant occupying a corner of the Mall of the Emirates.

Through tax breaks, gigantesque architecture, a well-trained security force, and spectacularly wasteful air conditioning, al-Makhtoum and his “Brand Dubai” team managed to create a buzz and turn Dubai into a seemingly safe, secure, friendly place to live. The Dubai fantasy peaked with the creation of Dubai’s housing bubble in 2002, when al-Makhtoum encouraged foreigners to buy property in the emirate. This unleashed a giant Ponzi scheme, fueled by money launderers and speculators who typically “flipped” properties after making a 10 percent down payment, driving up prices to absurd heights, and leaving the final investor catastrophically exposed when the bubble, inevitably, burst.

Moreover, the real estate boom was kept going by a Dickensian labor system that was bound at some point to self- destruct. At the height of the boom, tens of thousands of Southeast Asian laborers, banned by Dubai’s labor laws from forming unions, were put to work for eighty hours a week to build the Dubai fantasy and obliged to live in squalid residential camps in the desert. There, according to a report in the Guardian, they were packed “twelve men to a room, forced to wash themselves in filthy brown water and cook in kitchens next to overflowing toilets.” Before the crash, workers had begun to agitate for reforms; one target has been the kafala system, which requires foreign workers to have “sponsors” to obtain a visa and mandates their immediate deportation if they lose their jobs. A Kuwaiti government minister called this system “human slavery.”

In late 2008, Dubai’s leaders clung to the hope that the emirate would escape the widening financial crisis. The shift of some capital from the West to the emergent economies of the Middle East and East—summed up by the formula “Shanghai, Mumbai, and Dubai”—wrongly convinced many of them that Dubai would keep riding high while Europe and America tumbled. By late 2008, bankers had stopped lending money to Dubai’s heavily indebted real estate firms, and the steep fall of property prices made it difficult for them to continue servicing their debt. In February 2009, The New York Times reported that real estate prices had dropped 30 percent in three months, and that three thousand cars had been abandoned at Dubai International Airport by fleeing expats. (Dubai officials disputed this figure.) In November 2009, Dubai World, the gigantic investment company that runs a portfolio of businesses and projects for the Dubai government, announced that it would be unable to make a $10 billion payment on its $59 billion debt, roughly three quarters of Dubai’s total debt of $80 billion. After global stock markets fell the company laid off 10,500 employees worldwide, or nearly 20 percent of its workforce. Only the last-minute intervention of oil-rich Abu Dhabi saved Dubai from a potentially catastrophic default.

The emirate still has considerable resources, thanks to its strategic position in the Persian Gulf, its well-developed tourism, and its companies engaged in international trade. Emirates Airlines, Dubai’s carrier, recently ordered thirty-two new A380 airbuses for its fleet, and it reportedly grew by double digits last year. Dubai still has a sheen of glamour. It remains a center for breeding and racing horses, many of which run at tracks in Europe or in the Dubai World Cup, the world’s richest series of horse races. Sheikh al-Makhtoum is an avid horse breeder, along with his second son, Sheikh Hamdan, while one of his wives, Princess Haya bint al-Hussein, daughter of King Hussein, participated in the 2000 Summer Olympics in Sydney representing Jordan in horse jumping. Still, Dubai may have lost “25 percent of its economic activity” with the collapse of its real estate industry, a British financial writer told me, and has plunged into a deep recession that could linger for many years.

Dubai has long made claim to being a “world city,” a meeting place of East and West, a bastion of moderation in a region prone to extremism. The collision of nationalities—Iranians and Americans, French and Yemenis—in its shopping malls and amusement parks can be exhilarating. But this souk-like air of openness has a dark side. The desert entrepôt is a Mecca for illicit enterprises ranging from human trafficking to arms smuggling. The term “five khandred,” uttered in a mock Eastern European accent, is one of the classic examples of Dubai-speak, referring to the going rate for the Russian prostitutes who frequent hotel bars and shopping malls.

In 2001 a World Customs Organization report confirmed that Dubai was a major smuggling route into Europe, and the US government accused Dubai the same year of serving as a conduit for Taliban gold. (The UAE was one of only three nations—the others were Saudi Arabia and Pakistan—to recognize the Islamic fundamentalist government in Afghanistan.) The rogue Pakistani nuclear scientist A.Q. Khan used Dubai to pass on nuclear components to Libya and North Korea; the notorious Russian arms trafficker Viktor Bout, the “Merchant of Death,” operated a large cargo company in Dubai’s next-door neighbor, Sharjah, and used it to funnel weapons to génocidaires in Rwanda, Marxist guerrillas in Colombia, and, allegedly, al-Qaeda.

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