# Trillion dollar gamble on future of Gulf



## cyborg81 (Nov 15, 2004)

Trillion dollar gamble on future of Gulf
By Ambrose Evans-Pritchard (Filed: 09/05/2006)

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/05/09/ccgulf09.xml&menuId=242&sSheet=/money/2006/05/09/ixcoms.html 

A fifth of the world's high-tower cranes are mounted on a 30-mile strip of the Persian Gulf running from Dubai to Abu Dhabi, each serving teams of migrant workers toiling through the night by spotlight on 12-hour shifts.
It takes them nine months to knock up a 50-storey block of luxury flats, sold out instantly - at least for now - to Arab investors flush with petrodollars, Europe's tax exiles and, lately, Iranians in need of a bolt-hole.
Indian workers crawl like ants over the half-constructed Burj Dubai, soon to spiral up half a mile in glimmering layers, more than three times the height of Canary Wharf.
From the Burj you look past a Manhattan of rising skyscrapers to the Jebel Ali International Airport, where work is under way on the hub of all hubs, boasting six runways and eight concourses for 146m passengers a year, as much as Heathrow, Frankfurt and Paris combined. This is on top of Dubai's other airport, already vaulting into the top tier with 60m capacity by 2012.
"I can see $200bn of projects from my window," says Edmund O'Sullivan, editor of the Middle East Economic Digest (MEED).
"Go to Saudi Arabia, Kuwait, Qatar, Jordan, they're all copying Dubai. If they see a piece of desert, they think it would look a lot better with concrete on it," he said.
"With oil at $70 a barrel, this region is cooking and the consensus is that this will go on for another five years. What happens after that is the big question," he said.
In the 1970s, petrodollar billions spread across the globe, mostly wasted on luxuries or recycled through banks into Third World booms and busts.
"They have learned their lesson. This time the money is going on infrastructure at home," said Motaz Ibrahim, an economist at SHUAA bank in Dubai.
The IMF forecasts that oil states will rack up a current account surplus of $480bn (£260bn) in 2006, three times that of China.
A chunk of the money is going into the US bond market, keeping the American housing bubble afloat, or into big name global companies. Dubai - the clearing house for the Gulf's huge share of this wealth - has bought P&O, Madame Tussauds, CSX World Terminals, a $1bn share of DaimlerChrysler, and now a slice of Euronext.
Yet a staggering sum is being spent planting skyscrapers like poplars along both coasts of Arabia. The past few weeks alone saw a fresh crop of eye-watering ventures. 
The Saudis unveiled the $27bn King Abdullah Economic City, a Paris-sized monster rising from the dust beside the Red Sea, with a port to match Rotterdam, and a Square Mile of banking towers on a reclaimed island. The builder is the Binladin, Osama's more respectable kin.
Not to be outdone, Abu Dhabi upped the ante with its $28bn spree, led by plans for a 150,000-strong city with 29 hotels - including a futuristic 7-star flagship, now de rigeur in the Gulf - on Saadiyat island.
Hoping to trump them all, Kuwait is to spend $150bn on its Silk City for 700,000 people, with a tower topping 1km to be built by Eric Kuhne, the designer of Bluewater in Kent. It will be twice the height of any building now in existence.
A hop away, the gas sheikdom of Qatar is spending $130bn building a smelting and industrial hub. Disdainful of brasher Dubai, the Blackpool of Arabia, it aims to capture the world's seriously rich at its Pearl islands complex in Doha. There are now more than $1,000bn in investment projects under way in the Gulf region alone, quadruple the level 18 months ago, according to a MEED survey.
Oil, gas and petrochemicals are taking $316bn but the lion's share of $540bn is being spent on construction, hotels and real estate.
Who will occupy the property, since scarcely anybody lives in or around the Arabian peninsular? The population of the six states of the Gulf Cooperation Council (Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain and Oman) is just 36m.
"It's obviously a bubble. There will never be enough tourists to make all this work but you can't quote my name: I have to live here," said a financial expert.
Most remain exuberant, swept along by the intoxicating boom, too busy making fistfuls of dirhams and dinars to dwell on the immense risk posed to this hyper-investment by rising global interest rates.
The oil bonanza is the direct result of the monetary policies of the US Federal Reserve and the Europe's banks, which flooded the world with liquidity from 2002 to 2005 by holding interest rates at or below inflation. The Bank of Japan chipped in, spending $600bn of printed money on US bonds between from January 2003 to March 2004 alone. China let rip with top-down credit.
All are now turning off the tap. Some are draining fast, fearing inflation. A global downturn will come as surely as night follows day, and we will see what happens to oil.
Technology can play tricks too. Remember the ash-white face of the Saudi ambassador when George Bush told America it was time to "move beyond a petroleum-based economy and make our dependence on Middle Eastern oil a thing of the past"? Washington is investing manically in hydrogen research and rewriting the farm laws to foster a switch to plant-based ethanol.
Dubai, perhaps, has the chutzpah to pull off its gamble. It alone has torn down the barriers to foreign ownership of property. Running out of oil, now just 7pc of GDP, it has reinvented itself as a media, show-biz, sporting and money entrepot, with a budding "City" presided by a British judge, under UK commercial law, aiming to capture the region's petrobillions.
Conjuring an archipelago of islands and sandy beaches out of blank water, Dubai is earning its place as a phenomenon that everybody will have to see once in their life. In keeping with its tone of high kitsch, a $20bn "Desert Disney" promises an indoor rainforest and ski slope (Dubai's second), a life-size Taj Mahal, and - of course - the biggest shopping mall in the world.
Everything here is a "planet beater", all made possible by desalination technology that has turned the salt waters of the Persian Gulf into an inexhaustible reservoir.
Love them or hate them, the ruling Maktoum family have launched their ventures with a swashbuckling bravado now almost extinct in the crabby, static societies of old Europe.
"Dubai is like the city states of Venice and Genoa in the Middle Ages, dynamic out of all proportion to its population," said Maurice Flanagan, the co-founder of Emirates Airline, itself now conquering global aviation.
These latter-day Doges have thrown their doors open to multiculturalism, authoritarian though they may be.
Dubai is Arab in name only. Persians, Australians, Dutch, Palestinians, Sudanese, Thais, Filipinos, and 100,000 British, among others, make up, 85pc of Dubai's 1.2m residents - not to mention the 250,000 strong army of helots building the pleasure domes, who topple to their deaths from scaffolding or die crushed beneath falling debris at the rate of almost one a day.
"In the nineteen years I've been working in the Dubai, I've never seen the Maktoums fail in any big project, so don't write off all this building as a bubble," said Mike Derrett, a consultant to Dubai World Trade Centre.
Yet politics intrudes. Beirut was once the luxury haven of the Middle East, until rival militias sprayed gunfire into every hotel along the Corniche. Terrorism is surely a threat if a cell of Islamic hotheads should ever take offence at the occidental hedonism of Dubai Inc, so close to Mecca?
As for that trillion dollars worth of projects, I fear the cranes will freeze as suddenly as they did in Bangkok when the music stopped in 1997, leaving a hideous sky-scape of girders and struts, but this time on a vastly greater scale.


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## DarkBlueBoss (Mar 3, 2005)

^^ too long, but interesting, and lets hope nothing happens in Dubai, and the music doesnt stop playing.....


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## sargon (Apr 11, 2006)

^^
I hope that music doesnt stop playing in the ME at all

:cucumber: :cucumber: :cucumber: :cucumber: :cucumber:
:banana: :banana: :banana: :banana: :banana:
:cheer: :cheer: :cheer: :cheer: :cheer:


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## malec (Apr 17, 2005)

One question. It's probably got a very obvious answer but I still don't understand. 

If a developer has sold all the units in a tower and is half-way through construction when a major crash happens, how would that stop him from finishing it? He's already made his money back hasn't he?


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## Naz UK (Jan 28, 2006)

^^ Well, it wouldn't be money (or lack of it) that would stop the development in this argument. It is saying that whatever the issue that causes the "crash" would scare builders away and they would simply take their money and run. E.g. terrorism, social unrest, civil war, crashing meteors, aliens, teenage gun battles, or watever else could possibly happen.


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## DUBAI (Aug 24, 2004)

Inflation would likely be a factor, and possibly if he has reinvested in developing other projects...


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## dubaiflo (Jan 3, 2005)

malec said:


> If a developer has sold all the units in a tower and is half-way through construction when a major crash happens, how would that stop him from finishing it? He's already made his money back hasn't he?


i don't get exactly what u mean, but u r saying, the developer could just stop construction, because he already made his money?

well. it is all about reputation in this case..
and future investments.

that is the problem with companies like ayoubco.


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## malec (Apr 17, 2005)

What I'm saying is, if a developer has already made back the money he invested, then what would stop him finishing the tower if a something happens.


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## wolf_man (Nov 30, 2021)

cyborg81 said:


> Trillion dollar gamble on future of Gulf
> By Ambrose Evans-Pritchard (Filed: 09/05/2006)
> 
> Money
> ...


Long post but quite interesting. Thanks


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