The Curse of Oil Wealth:Dubai's Dramatic Drop
by Daniel Pipes
FrontPageMagazine.comFebruary 25, 2009
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As the Muslim world settled into ever-deeper decline over the past decade, mired in political extremism, religious sickness, economic irrelevance, WMD, anarchy, dictatorship, and civil wars, Dubai stood out as a happy anomaly.Burj Al Arab claims to be the world's only 7-star hotel.
Under the leadership of HH Sheikh Mohammed Bin Rashid Al Maktoum, Dubai (one of seven polities within the United Arab Emirates) invited peoples from around the world to come make money and they did; about 83 percent of its population of 1.4 million is foreign. The emirate intelligently exploited the energy boom surrounding it and had the ambition not just to globalize but to become a leader at globalization. Dubai became renowned for the world's only tropical desert ski slope, the world's only 7-star hotel, and the world's very highest building, all done with a new-agey twist. (Publicity for the skyscraper, for example, presents it as "an unprecedented example of international cooperation" and "a beacon of progress for the entire world.")But if Dubai seemed to be an exception to the general Muslim trajectory, it was only temporary.In three distinct arenas – economics, culture, and sports – very recent developments show how much the statelet has in common with the impoverishing and separating Muslim world.
Economics
Dubai was the froth of the early 2000s, the purest example of a bubble economy based on rising prices and boosterism, a Ponzi scheme among the nations. Already in 2006, financial writer Youssef Ibrahim dissected its trompe d'oeil economy:The huge oil revenues that have been pouring in for two years have nowhere else to go but into more and more real estate speculation. It makes for great business for the developers and their Western and Asian contractors, as well as for the owners - the sheiks, kings, emirs, and their big businessmen friends who own the deserts on which these mirage-like projects are being erected.The formula from their perspective is straightforward: Sell desert land to investors at a premium. Then double the profits by financing the construction of artificial islands, lakes, and massive air-conditioned shopping malls, alongside pie-in-the-sky projects like the largest ski slope in the desert, a Jurassic Park complete with mechanical dinosaurs right out of the movie, and millions of housing units. Then get the hell out and let them eat cake.Burj Dubai is the world's highest building; but will it be inhabited?
Dubai's leadership, Ibrahim notes, invested its profits "from selling Disneyland desert fantasies in enduring assets outside the Gulf," such as port facilities and hotel properties.When the music stopped last fall, with a world-wide recession and the price of oil tumbling over two-thirds, no one got harder hit than the Dubai dream machine. Just as it ascended with panache, so it now sinks con brio. One example, as reported by Robert F. Worth in the New York Times:With Dubai's economy in free fall, newspapers have reported that more than 3,000 cars sit abandoned in the parking lot at the Dubai Airport, left by fleeing, debt-ridden foreigners (who could in fact be imprisoned if they failed to pay their bills). Some are said to have maxed-out credit cards inside and notes of apology taped to the windshield.This unique abandoned-car syndrome results in part from the emirate's stringent work rules. As Worth explains, "jobless people here lose their work visas and then must leave the country within a month. That in turn reduces spending, creates housing vacancies and lowers real estate prices, in a downward spiral that has left parts of Dubai — once hailed as the economic superpower of the Middle East — looking like a ghost town."Signs of the new penury abound:real estate prices, which rose dramatically during Dubai's six-year boom, have dropped 30 percent or more over the past two or three months in some parts of the city. …
So many used luxury cars are for sale, they are sometimes sold for 40 percent less than the asking price two months ago, car dealers say. Dubai's roads, usually thick with traffic at this time of year, are now mostly clear.Expatriates in Dubai are now so down on the country, Worth explains, some see it "as though it were a con game all along."There is every reason to think that the economic descent has just begun and has a long way to go. As this happens, foreigners are fleeing. Christopher Davidson, a specialist on the UAE at Durham University, notes that "When Dubai was rich and successful, everyone wanted to be its friend. Now that it has no money in the pocket, nobody wants to be pals anymore.
"Culture"
When it comes to cultural extravagance, Dubai cedes first place to its neighbor, Abu Dhabi, which in early 2007, announced the "Cultural District of Saadiyat Island" to include satellites of the Guggenheim (costing US$400 million) and Louvre ($1.3 billion) museums, plus about two dozen other museums, performing arts centers, and pavilions.Still, Dubai has ambitions, if more modest ones and the first Emirates Airline International Festival of Literature, opening on Feb. 26, is to serve as its literary coming-out party. A welcoming message from the director of the festival, Isobel Abulhoul, explains:EAIFL is the first true literary Festival in the Middle East celebrating the world of books in all its infinite variety, with over 50 events featuring authors whose books range from some of the finest contemporary literary fiction to inspirational lifestyle titles, via the magical worlds of children's, fantasy and science fiction writing. We invite you to share and enjoy their company in a relaxed Festival atmosphere, made even richer by our vibrant fringe which showcases the wonderful and diverse talents from our very special city, Dubai.British author Geraldine Bedell was disinvited from Dubai because her novel The Gulf Between Us tells about a gay sheikh.
The festival boasts authors from twenty countries, including such big names as Frank McCourt and Louis de Bernières.All good, but the EAIFL hit a bump before it even opened, one that threatens to overshadow the event itself. Never mind "the world of books in all its infinite variety"; the festival banned British author Geraldine Bedell because Sheik Rashid, one of the minor characters in her novel The Gulf Between Us (Penguin), is a homosexual Arab with an English boyfriend; to make matters worse, the plot is set against the background of the Kuwait War.As Abulhoul wrote to Bedell, disinviting her. "I do not want our festival remembered for the launch of a controversial book. If we launched the book and a journalist happened to read it, then you could imagine the political fallout that would follow." As for the Kuwait War, that "could be a minefield for us."Bedell responded that her novel "is incredibly affectionate towards the Gulf. I feel very warmly towards it, except when things like this happen. It calls into question the whole notion of whether the Emirates and other Gulf states really want to be part of the contemporary cultural world ... You can't ban books and expect your literary festival to be taken seriously."Indeed, the biggest name of the Dubai event, Canadian author Margaret Atwood, stayed away in protest at Bedell's exclusion ("I cannot be part of the festival this year."), eventually agreeing to appear via video link-up in a debate on censorship to be staged by International PEN at the festival.
Sports
Shahar Peer is the Israeli tennis star excluded from a tournament in Dubai because of her nationality.
Nor can you ban one of the game's finest players and expect your tennis tournament to be taken seriously. But Dubai did that earlier this month when it banned Shahar Peer, 21, ranked 45th among female players globally, from its $2 million women's Barclays Dubai Tennis Championships.Why? Well, she is Israeli. Organizers of the event cited security fears as their reason to bar Peer.In consultation with Peer, the Women's Tennis Association decided to continue with the Dubai tournament. "She didn't want to see her fellow players harmed the same way she was being harmed," said Larry Scott, CEO of the WTA.
Still, Peer's exclusion had immediate repercussions for Dubai. The Tennis Channel canceled coverage of the event; The Wall Street Journal Europe revoked its sponsorship; event organizers were fined US$300,000 ($44,250 of which will go to Peer); and American star Andy Roddick said he would boycott the male championship in Dubai. During the trophy ceremony, tournament winner Venus Williams discomfited the hosts by mentioning Peer's exclusion.
Not only was Scott bombarded with messages from upset fans ("It's an issue that obviously touches a nerve") but he reported "a real snowballing effect": "I've been contacted by representatives of other businesses, academic institutions, cultural institutions that equally would only have invested in being in the UAE if they had the same assurances we had that Israelis could participate in the activities."As a result of the Peer fiasco, Andy Ram, an Israeli ranked 11th among male tennis players was granted a "special permit" to enter Dubai and will play this week in the male Barclays Dubai Tennis Championships. To stay on the tour schedule in 2010, the Dubai organizers must guarantee Peer a wild-card entry, so she gets to play there even if she fails to qualify, and must grant qualifying Israeli players visas eight weeks in advance.In other words, Dubai must accept international rules or it excludes itself from championship play
. That is no small matter in a statelet that has gone into top-tier sports in a big way as a way to attract tourism; the Associated Press notes that it "hosts the world's richest golf tournament and horse race, is home to the world governing body for cricket and is building a $4 billion Dubai Sports City to house stadiums, sports academies and one of several lush golf courses.
"Conclusion"
Through a heady mix of speed and affluence, Dubai tried to vault over tough economic, religious, and political decisions. The establishment hoped that building big would substitute for a sound base. It hoped to finesse troublesome issues, that glitz would overwhelm substance. For example, it expected that patronizing prestigious events would permit it to change the rules; Dubai says no minor homosexual literary characters or no Israeli tennis players? So be it! Dubai rules, the globe follows.But that will not happen. The sharp drop in oil prices exposed the country's inescapable weakness, while Dubai's literary and tennis debacles confirmed the point. Instead, an entirely different model now tempts it – what I call the separation of civilizations. Unable to impose their way, Persian Gulf Arabs are retreating into a Muslim ghetto with its own economics (including Shar'i compliant tools), consumer goods, media, transportation, fast foods, sports competitions, search engines, and even systems of keeping time.
This course is doomed to failure. At a certain point, the issues at the center of Muslim life for the past two centuries – the tension between tradition and modernity, the opposition of Muslim identity to universal values, the strains of economic development – will have to be faced. Hucksterism and fast talk will not solve these problems. As Dubai's vacation from history abruptly ends, its hard work begins.
Related Topics: Persian Gulf : www.DanielPipes.org
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