Tuesday, December 1, 2009

Wrong Desert, Good Analogy, Dubai is a Massive Pyramid Scheme

Last week Dubai World Corp attempted to reschedule some of its debt. Stock markets across the planet fell but initially many of the commentators I watched on the business channels told people not to panic, because "the economics of Dubai were fundamentally sound." I'm not sure that I agree with that. When you walk around the empty malls, empty bookshops, empty cinemas and empty restaurants in Dubai you wonder if this Emirate without any oil or other natural resources really represents the future of urban planning, architecture and civilization as we know it (which its leaders proclaim). Parts of Dubai are like a movie set or ghost town and just as many cranes are standing idle as working. By Monday it seemed that people were finally waking up to the reality in Dubai. I read an interesting summary of opinion about the Emirate's potential problems in the New York Times here and a rather more ballsy piece by Rod Liddle in The Times of London here. And I found this little article tucked away on CNN which wonders if the Dubai real estate market is and always was a gigantic pyramid scheme:
London, England (CNN) -- For the past decade, Dubai has been home to the greatest concentration of cranes anywhere in the world as billions of tonnes of concrete, steel and glass have refashioned the city skyline. But the rapid growth of the past six years has slowed recently due to the global slump in property prices. Hopes of a recovery have now been further imperiled by the news that the state-owned Dubai World has requested to delay paying its massive debts by six months. Dubai has become a playground for architects as well as millionaires commissioning a string of audacious building projects aimed at helping reposition the city as the financial and cultural hub of the Middle East. Billions of dollars have been spent transforming the landscape, erecting buildings which continue to break records of all dimensions. The Burj Dubai -- at 818 meter the world's tallest skyscraper, the vast Palm Jumeirah -- built on land reclaimed from the sea, the Dubai Mall -- the largest shopping center in the world and the Mall of the Emirates; home to the world's biggest indoor ski slope form part of a very long list of completed construction projects. "The whole place is kind of like a time-lapse film. You wake up in the morning and it's just a little bit different," Jim Krane, author of "City of Gold: Dubai and the Dream of Capitalism" told CNN. But, according to Krane, some of these projects, like the Burj Dubai, suffer from a severe lack of practicality. "Dubai doesn't really need to have to build tall asides from prestige purposes. If you look at it, it's a really bad idea. It uses as much electricity as an entire city. And every time the toilet is flushed they've got to pump water half a mile into the sky," he said. The telescopic shape is also presents problems of a more practical nature Krane thinks. "The upper 30 or 40 floors are so tiny that they're useless, so they can't use them for anything else apart from storage. They've built a small, not so useful storage warehouse half a mile in the sky," he said.
The CNN piece also mentions the $12 billion Palm Jumeirah where David Beckham has a home and "You can't even see the sea and all the fronds which house the communities are gated." And they conclude with the ridiculous sounding Palazzo Versace hotel in Dubai which is going to have a beach "featuring refrigerated sand."