Dubai thought it would escape global market turmoil, but November 2009 proved otherwise. Colin Simpson explains why the emirate is stronger for it today.
Dubai cranes are rising again as emirate finds economic feet
DUBAI // It has been almost three years since the Government-owned conglomerate Dubai World revealed it was seeking a delay in repaying its US$60 billion (Dh220.3bn) debts.
November 25, 2009 was a defining moment in the economic downturn that brought the boom years to a grinding halt.
Today, there could be no clearer sign Dubai has put those dark days behind it than a raft of new development announcements made yesterday by Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai.
Among the announcements is the Dh2.5 billion expansion of Dubai Holdings' Madinat Jumeirah and news that the Dh1.5 billion extension of Business Bay Canal will begin in a few months' time.
Even before yesterday's announcements, there were positive signs of recovery. Property prices were climbing to their pre-crash peak, new private sector construction projects were being announced and the economy was growing steadily.
It's a far cry from the days of late 2008, when the emirate's debt troubles began as a result of the global property market crash.
Prices in Dubai had plunged by 50 per cent in just over a year by the time of Dubai World's default announcement, according to Deutsche Bank. More substantial declines were to follow.
Many expatriates lost their jobs, pausing only to abandon their cars as they hurried to the airport.
Early confidence that Dubai was immune to the effects of global economic turmoil soon evaporated. The cranes that had become a symbol of Dubai's helter-skelter development vanished from the skyline.
But the cranes have started to return, and the impression that the good times are returning is backed up by facts and figures.
A new report by Standard Chartered, while stressing that the debt problems have not gone away, says a rebound in Dubai's key industries - tourism, trade and logistics - means the emirate is in much better shape to handle them than before.
Chiraz Labidi, the assistant professor of finance at UAE University, said: "Several indicators show that Dubai's economy is recovering gradually." She said the Department of Economic Development's Business Confidence Index had risen to 106.1 points in the second quarter of this year compared with 100 in the same period of 2011, which reflected a rising positive business outlook.
"Dubai economy's recovery is led by non-oil economic growth and this is clearly a result of the successful diversification of its economy. Its safe haven status in the context of the Mena region turmoil has also directly benefited the tourism and real estate sectors."
Dubai's population climbed above the two million mark last December and has continued to rise, according to the Dubai Statistics Centre.
One of the leaders of Dubai's development over the past decade was Emaar Properties, which built the Burj Khalifa, the world's tallest tower.
Emaar's managing director, Ahmad Al Matrooshi, said: "Dubai's economy is back on the positive growth track, demonstrated by the strong market and customer confidence. Traditionally, the drivers of Dubai's economy have been the core sectors of trade, tourism, hospitality, aviation and logistics.
"All these sectors are performing exceptionally well, with Dubai Airports welcoming about 51 million passengers last year."
Some believe there will never be a return to the exuberance and extravagance of the development boom.
"The consequences of excessive risk-taking and speculative capital inflows can be exacerbated by high levels of global exposure," said Prof Labidi, who added there were lessons to be learnt from the crash.
"While Dubai's economy has shown resilience to the Euro crisis, the authorities need to remain vigilant to global shocks and continue to closely monitor bank liquidity."
Jim Krane, author of Dubai: The Story of the World's Fastest City, said: "Dubai still owes a lot of money to a lot of people. Those debts are injecting pragmatism into its ventures.
"In some ways, the hard times have been good for Dubai. The city is hungry and competitive again, and its creativity is intact."
With additional inputs from WAM