Saturday, December 20, 2008

Can Dubai Meet the Challenge?

Dubai never misses an opportunity to be out front. Yet, reality, a realization that even in Dubai global recession means it is no longer business as usual may be kicking in.

Within days of announcing plans for the world's first climate controlled beach, Emirates Sunland Group, a joint venture between privately-owned Emirates Investment Group and Australia's Sunland said the project was on hold until it could be established whether the project was environmentally sustainable. "If an environmentally sustainable approach cannot be found and guaranteed then Sunland Group will not develop the beach in this format," said Soheil Abdeian, the group's founding director, according to Abu Dhabi newspaper The National.

The reversal highlights the pressures on Dubai, a young shoot struggling to grow between two massive trees as Emirati film maker Hamad al Awar in his 2006 animated feature Once Upon A Seed portrays his native land's efforts to carve out its niche in a global economy. Framed before the global economic meltdown during the heyday of Dubai's Richard Bransoniesque development push -- Screw it, just do it, or more elegantly put in the words of Sheikh Rashid al Maktoum, the current ruler's late father, build and they will come -- Al Awar's metaphor probably referred to regional power houses Saudi Arabia and Kuwait.

It harked as far back as the late 1980s when Gulf leaders gathered in Abu Dhabi to create the Gulf Cooperation Council (GCC). Emirati leaders and merchant families then worried whether they would survive competition with the region's wizened, experienced traders, the Kuwaitis, and the far less shrewd but cash-rich Saudis who also benefitted from their sheer population figures. Those anxieties are long gone. Today, the emirate competes with the best of the best and in many ways sets the tone.

Just how far it has come was highlighted this week by a report commissioned by the office of London mayor Boris Johnson predicting that Dubai among others could overtake the City as one of the world's foremost financial centers. "Other centers are simply more coordinated, more strategic and more aggressive" than London said Bob Wigley, Merrill Lynch chairman for Europe, Middle East and Africa and the head of Johnson's panel.

Yet, the report came just as Dubai witnessed its first layoffs in the financial sector and credit rating agencies downgraded the region's financial institutions, many of them in Dubai. The downgrades in ratings and/or outlook reflected fear that already hard hit stock and real estate markets in Dubai and elsewhere in the Gulf could deteriorate further. That in turn would affect asset their quality and profitability.

Emiratis and particularly Dubai will certainly take pride in the fact that their Gulf outpost is viewed as a worthy rival to the world's foremost, albeit humbled, financial centers. But that may be less glory to bask in and more a clarion call that much remains to be done for the emirate to be continued to be counted in the world's top league. Being the world's best, most outlandish, biggest, tallest or whatever may no longer be the name of the game. Getting it right has replaced that. If anything, the Johnson panel warning to the elders of London poses the challenge to Dubai to rise to the occasion.

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