From The Economist
Dubai’s visionary ruler is determined to keep smiling amid the gloom
THE new metro in Dubai, the glitziest but most heavily indebted of the seven statelets making up the United Arab Emirates (UAE), is not the world’s biggest, fastest or costliest. But even in these straitened times, the city-state has rolled out this latest bauble with its usual flair. In flowing robes, amid laser lights and red carpets, Sheikh Mohammed al-Maktoum, Dubai’s ruler, launched the inaugural service on the auspicious date of 9/9/2009.
Built by a Japanese consortium in just four years, the driverless system’s first line comes complete with sleekly futuristic air-conditioned stations, leather seating for first-class passengers and carriages specially designated for women. The Arabian peninsula’s first urban railway looks swell, it may unclog the roads and should be a welcome convenience to the ordinary folk who cater to Dubai’s plushily motorised elite.
And yet Dubai’s economy is still stalled on the tracks. Though the cost of commercial rents has fallen by half since the start of the year, nearly a quarter of Dubai’s office space is empty. A third of all building projects are reckoned to be frozen, yet so much new space is still coming on to the market that the glut may persist well into next year. The general slump, after years of breakneck growth and soaring prices, has spread its poison through the economy. A survey in a local magazine finds that workers across the UAE this year have taken salary cuts of 26-30%.
Sheikh Mohammed recently likened his realm’s troubles to the headwinds slowing down an aircraft. Insisting that those winds were now blowing less fiercely, he dismissed worries about government debts, which are estimated to total anything between $80 billion and $120 billion (equal to 100-150% of GDP). Dubai’s intricate web of parastatal corporations controlled by the Maktoums may indeed find the cash to tide them over.
There is plenty of it still sloshing around. Where else would a government think of selling seat-belts with designer labels to promote road safety? The friendly neighbouring emirate of Abu Dhabi, which has been bailing Dubai out, is still flush with petrodollars. And Dubai still draws customers by being a pleasanter place than other Gulf destinations. Yet even Sheikh Mohammed, whose ambition has inspired Dubai’s furious drive for superlatives, says he will now be more careful.
As for the metro, it is debatable whether the $7.6 billion investment will make a profit even after more of it becomes operational in five years. Dubai’s rapid-transit authority says it could cut traffic by 17%, and slash losses due to delays. But how many of Dubai’s 1.6m people will give up their 1m air-conditioned cars to walk even short distances in the punishing summer heat? At any rate, the sheikh can console himself with the knowledge that the metro will be the world’s biggest computer-operated train system, and its Union Station will have the world’s biggest underground railway concourse.
Source: The Economist