Dubai Incorporated

Khalil, very interesting and informative article.Thank you. Economics is my life long passion and I have strong opinions.
Value of real estate depends on where people want to be without any hype. Dubai is just a trading post like Singapore. The days of hot money havens are coming to an end. They should try to attract high tech businesses if they can. Banking is the biggest drag on most economies and it is going to last for a while.

Do you have any feel as to how people who took money out of Pakistan couple of years back are doing in their investments?

Re: # 22

Russians are wise, most of them are doing business in sharjah, a state which is not as high tech as dubai but has a potnetial for business, especially cargo business.

sharjah airport has a huge freezone for cargo & anytime you can see 5-10 russian cargo planes parked there. dubai airport has banned these antonov planes due to the noise and the smoke they produce, so the russian took thier business to sharjah freezone where it's cheap plus sharjah is more accessable from other emirates, no traffic congestion,which saves time and less charges for services compared to dubai airport freezone.

sharjah has plenty of land around it's airport and it can expand to miles and miles where dubai is out of space now, they have consumed almost all the land with stretching of thier runways and clearance for glide slope (the angle on which the plane approach the runway for landing)

See the google earth and you can see on both sides of the runways it's densly populated now.

dubai has the worst traffic scenario at the moment, everyday they lose millions due to cargo being stuck in traffic, they are building a new freezone outside jebel ali airport (which is yet to take any shape) & it will take a decade least & with recession looming, may be more.

#23

this is just one story, the jails in uae are mostly full of ppl with bounced cheque history or being black listed due to non payments of either loans or they left thier sponsor without the will of the sponsor.

From GULF NEWS

Dubai: The dream of making it rich in the UAE has turned into a nightmare of jail and police for hundreds of expats, locked up for bouncing cheques as booming businesses went bust.

For one Briton, the nightmare of prison and a lengthy jail sentence is looming large, all for a series of bounced cheques issued when his construction sub-contracting business went belly up.

"If I knew then what I know now, I would never have come to Dubai in the first place," explains Mark, his thick bricklaying-hardened hands coupling a coffee. "And I certainly would have conducted my business better, not been as lax with the guys who I was dealing with."

For most of the past two months, Mark was in Bur Dubai jail, awaiting bail for bouncing a cheque worth Dh180,000. He was bailed recently , but his British passport has been detained. For the foreseeable future, he's stuck in Dubai, unable to leave, and is facing a lengthy prison term.

"I have no way of paying the money back," he says. "I'm out [of jail] for the moment, but I can't get any access to funds. I have nothing, I'm living with friends and I'm going to go back in unless I pay it off - which I can't do."

Mark is not alone.

According to official statistics issued in May, 544,196 bad cheques were written in the first four months of the year across the UAE. On average, one of every 20 cheques written during that period was sent back by a bank marked "Refer to Drawer" or "Insufficient Funds".

For three years, things were good for Mark. He'd come at the height of the building boom, knew a few buddies from the construction trade back in Birmingham who had come out before him, getting jobs as project managers and superintendents with multi-national corporations, laying the foundations for Dubai's prosperity.

"I had a few contacts when I got off the plane," he recalls, back in the heady days of early 2006. "Within a couple of weeks I was flying, doing bits of finishing work in some workers' accommodations and finishing off a couple of villas in Mirdif," he says. "There was no shortage of work. I brought a couple of other guys out and we had a couple of crews working for us in no time. It wasn't big stuff, but there was lots of work."

And because there was no difficulty in picking up more work to keep his guys working, there also seemed to be money coming in to pay the overheads and wages.

"There wasn't really any issue of not getting paid," he recalls. "A lot of it was personal contacts and you always got the money eventually, even if it was in dribs and drabs or a few weeks late. But there was enough work to keep us going and the bank had no problem offering financing, so I always kept it going."

Like many expats from Western countries, Mark fell into the trap of living the lifestyle he'd dreamed off growing up rough and tumble in the Midlands - the 4X4, the Marina view and the flash clothes, even the trophy girlfriend. All are now gone, her back to the Ukraine.

"I'm driving a beaten up Sunny now and I'm lucky if I can borrow Dh20 to pet petrol in it," he says. Instead of a two-bedroom 1,800-foot place with Marina and partial sea view, it's a bedroll in a maid's room in Al Ghusais. Up the week before, it was a corner of the outside courtyard in the sand in Bur Dubai jail.

"There was about 20 of us Brits in there, and most were either in for financial crimes, or for being drunk," he said. "It was pretty crowded in there. The food was all right, but you had to queue for a couple of hours to use the two phones in there, and then you only got three minutes."

By last October, the bloom had gone from the rose. For Mark, business became a bed of thorns.

"Mates who I had been doing business with suddenly weren't around," he recalls. "Their phones were turned off. They weren't hanging out in the usual watering holes. Whenever you met them, they'd run when they'd see you. The cheque would always be coming next week or tomorrow, or the bank is waiting to issue new cheques. There was always some excuse for not getting paid. The next thing I knew was that they had skipped the country."

Then things got suddenly worse.

"My bank wasn't lending anymore. They said I was a bad risk, that I needed to lower my debt ratio," he scoffs. "How could I lower my debt when I was not getting paid and the work was starting to dry up?"

He remembers well the sinking feeling in his stomach that his bubble had burst.

"I had a couple of cheques out, one for Dh125,000 for work I needed done on a villa, and the other was for Dh180,000 for block work in a workers' accommodation in Jebel Ali. I figured I was okay because I was owed around Dh270,000 and a couple of other little jobs as well."

Like a gambler who always reckons the next horse will win, Mark firmly believes he could have gotten through it all if the bank had just covered him off for a bit more.

It didn't.

"The last few months have been sheer hell," he says. "I've an ulcer, no passport, a police record and nothing else. She's gone back to Kiev because the gravy train came to an end, I'm stuck here paying the price for the credit crunch."

He points to his face. "See this?" he says. "This is the face of the credit crunch. Ugly, isn't it?"

What do you think should be the punishment for a bounced cheque? Do you think it should be treated as a criminal offence, or should their be alternatives?

By Mick O'Reilly, Deputy Managing Editor

bhs75 and vanguard,
Thank you for the recounting the detailed miseries that afflict Dubai. I am now wondering what will happen to the thousands of Ookranian, Russian, and Byelorussian expats who had gone to Dubai to spread goodwill and get rich?

Ibrahim Sahib,
Very informative and I enjoyed reading this article - the length being necessary to provide the details to support your perspective. Thank you. You mentioned that the rumors of getting a permanent domicile visa with purchase of a flat were false. If that is the case, what happened to all the Pakistanis who purchased based on this false assumption? I distinctly recall hearing all those ads on Geo TV with some famous TV stars peddling Dubai property AND a domicile.

well...i hate to be the party pooper, but amongst all this gloom in dubai, there are some bright spots like my former employer. While i had to leave my job in March 09 due to some personal reasons, my employer announced a 50 % salary hike and an average of 3 months salary as bonus for all employees. This was a reward for all of us working our balls out and ensuring that the company makes a decent profit even during the recession. moreover while most of the companies have been withdrawing some of the perks given to their employees, my employer has not withdrawn any perks or facilities for the employees. a great credit for this goes to the CEO / promoter of our company who despite his shortcomings is a wonderful person at heart..the kind you will rarely find today.

DK

so we had a visitor from dubai and we were very interested in the new island where sharukhan has a bangla etc. his wife told us that they could not go check it out..apparently sharukhan never had any bangla or anything it was just a scam to create the exclusivity feeling to attract other money. is that true? anyways these guys were working type and could not really afford the place..they just wanted to go check it out but could not.

In 2004, when Dubai was going in the bubble happily, one of our aged member of accounts staff said:

Saab, dubai ka rent bohat jiada ho gaya hay. I am retiring next year, but i don't think so that people at my level will be able to afford housing anymore...

and I said to him that James saab, don't get so pissed off. The rents will go up but within 5-6 years time, they will come down crashing, and a time will come when you will be able to live in JBR project comfortably in the building that our own company is building....

So I think market will further go down... and dubai model will be taught in business schools as an "idiot's guide to failure'....

dubai is always in a denial mode ..

1. poor labor treatment - denied

2. beating of labors - denied

3. raping of asian women, especially filipinos by thier landlords - denied

4. people are commiting suicide - denied

5. warehouses and buildings catch fire and burn to the ground due to poor quality control - denied

6. bad business practises - denied

7. people are losing jobs - denied

8. locals are getting away with crimes - denied

9. murders occure everyday so does various other crimes - denied

10. hashish and heroine is smuggled thru saudi and oman border - denied

11. people having similar names (which are black listed by the authorities) are arrested at the airport without any investigation - denied

12. supermarkets have no price list issued by the authorities and they can change rates when they like - denied

13. we can eye-ball your women & even do the hand jesture but you cannot even think of our women !!! - absolutely denied !!!

14. asian will get a traffic ticket but a gori or a local may get away with it due to color & wasta (links)!!! - are you kidding? denied !!!

15. your landlord can kick you out anytime or increase a rent 4 times in a year even if you show him the one year contract which he had signed !!! - definitly denied !!!

16. more locals are getting effected with HIV every month - denied

17. bribe is given as "gift" at all level of the govt. sectors. denied !!!

18. media is totally under the control of the govt. which means only good news should be printed - DENIED for eternity!!!

Re: # 13

That is exactly the reason Dubai will not come back_ the search for elusive bottom and hoping that once we touch it, we will rise again. What if the thing that you call bottom is the sustainable level for Dubai. It will remain at that level for foreseeable future.

Now they are introducing culture test for expats seeking residency. I don't think Desis will have a hard time passing the test with their school years spent in "cramming" stuff. Its the goras _ the white trash _ that will have trouble passing the test. They are the ones most oblivious to local sensibilities. But is the culture test being introduced to bar the whites or the Desis. Go figure.

What about the buildings and projects that were built for these filthy rich goras. The goras are going to come back. The desis will not going to afford them. So these buildings will remain empty and rust away.

What about the businesses that were set up to cater to this category of people furniture, accessories, eateries, car dealerships, without the goras they will never achieve their breakeven and hence have to shut down.

As I said earlier, the bottom is the real Dubai with the hard working Desis being major players here. Don't write off Dubai but don't count on it to achieve earlier heights.

Wait till the fraudulent merger of Emaar with Tatweer and other companies of Dubai Holding completes. You will realize that you have been taken for a ride. Then you have the $10 billion bond maturing in December. Lets see where the money comes from this time.

With your denial mentality, you are forcing me to engage in Dubai Bashing which I want to avoid.

Re: # 13
ejaz...
exactly for the same reason, Dubai will never be able to come back....Most of the countries are now simplifying Tax and Excise policy ...

time that dubai understood that south asians will only save them, not the amerikans and the british.

Dubai will come back, everything eventually comes back if you live long enough. Now that the cost of living there is more reasonable there may be a bottoming-out phase because Dubai's inherent structural advantages of zero income taxes, loose regulation, low interest rates and cheap labor are geared towards growth.

Its not only Dubai that went berserk, it was the whole world ...there are two differences of Dubai

1. They focused on upper classes and white only (which ran at the first sign of trouble). Had they focused on middle classes or at least thought about affordable housing, the problem would not have been this huge
2. They are still in denial mode.

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With all of my friends in Dubai having a stake in owning property, I did want to buy it. But the exhorbitant rent of dubai made exorbitant prices of Apartments in dubai reasonable for those living there. IF you were living abroad or in another country (except Qatar), Dubai prices seemed ridiculously high compared to the rent we were paying. That saved me from investing in Dubai plus I did not have that kind of money to invest anyway

the money is either gone or the real estate giants will not release it to keep thier financials in place, the millions they been receiving from the investors they put it in other projects, you think these companies invested something from their pockets? I don't think so, why they always ask you to pay like half now and half on delivery !!!

Some people are getting thier money back but only fraction of it that also thru the court, like a couple from england had invested 1.5 million already and when they went to pay the rest the company told them to hold thier installment and instead went quite, they went to the court and the court awarded them 250K which is nothing !!! they forget courts are also run by the sheikhs !!!

dubai has a tight grip on censorship and on media so unless a story slips out, you will not hear anything bad.

vanguard and bhs75...very insightful stuff from the both of you...where were you both before so many people put in so much money in Dubai, where it now seems its going to be stranded for ever?