South Asian Exodus From Dubai
Dubai police have found at least 3,000 automobiles -- sedans, SUVs, regulars -- abandoned outside Dubai International Airport in the last four months. Police say most of the vehicles had keys in the ignition, a clear sign they were left behind by owners in a hurry to take flight. It is believed that the owners of these vehicles are mostly foreign workers from South Asia who have lost their jobs after Dubai's real estate crash, according to a DNA report.
Dubai and other GCC countries are planning deficit-spending to stimulate their economies in 2009. Dubai will raise its budget by 11% for fiscal 2009. The city-state's finance department estimates the new spending will result in a modest fiscal deficit, Dubai's first ever. Other Gulf governments, including Saudi Arabia and Oman, have announced recently they will risk deficits next year instead of cutting back on spending, according to the Wall Street Journal.
Analysts have raised concerns about the large debt load Dubai has taken on in recent years to finance its explosive growth, mostly in real estate. Dubai is one of seven semiautonomous emirates that make up the United Arab Emirates.
Credit-rating agencies recently have revised downward the outlook -- and in some cases, the credit rating -- for a handful of Dubai-controlled corporations. Dubai doesn't have its own sovereign-debt rating. The city-state doesn't pump much oil itself, so it has depended on attracting foreign investment, especially from its oil-rich neighbors, and borrowing to finance growth.
The contagion that started on Wall Street in 2008 is fast spreading around the globe. The deepening recession in the United States and the end of speculative bubble has brought the oil price down to below $40 a barrel, down from $150 a barrel a year ago. The US consumer price index dropped 0.7% in December, 2009 from the previous month. Consumer prices rose just 0.1% compared to December 2007, the lowest calendar-year increase since 1954 and well below the Fed's 1.5% to 2% preference over the long run. The CPI swelled 4.1% in 2007. The core CPI, in contrast, was up 1.8% last year, though it did fall 0.3% on an annual basis during the fourth quarter.
A large number of families in Bangladesh, Sri Lanka, India, Nepal and Pakistan depend on remittances of tens of billions of dollars from workers in the oil-rich states.
UAE investors alone have invested over $13b in Pakistan during the last few years. The deteriorating economy of the oil-rich Arab nations will adversely impact foreign investments in South Asia in general. Major real estate developments by companies such Abraaj and
Emaar in India and Pakistan are likely to be delayed or scrapped.
While the oil price declines are going to spell significant relief for South Asians, the loss of remittances and foreign investments will also hurt their economies. It's too early to tell if the net effect will be positive, negative or zero.
The United Arab Emirates is delaying or canceling real-estate projects worth more than $260 billion amid falling demand and deteriorating market conditions, according to a new report by investment bank Morgan Stanley (MS).
The bank, citing data from Zawya.com, says $263 billion worth of projects in the U.A.E. have been delayed or canceled, "with all the recently announced mega projects, including Meraas Jumeirah Gardens , valued at about $98 billion and Nakheel's Harbour project, estimated at $38 billion, put on hold."
The report, released earlier this week, says lower oil prices, the global recession, tighter liquidity, job cuts and the absence of speculators have all put pressure on the sector, forcing developers to review project requirements.
"All of these factors have resulted in a worse than expected performance in the U.A.E. property market, especially in Dubai , which is also facing potential oversupply," the report says.
"In the fourth quarter of 2008, property prices corrected sharply downwards,rental rates eased in Dubai and there was an increase in the rate of announced projects delays/cancellations," it adds.
At the end of 2008, approximately $1.25 trillion worth of construction projects were underway in the U.A.E., according to London-based Middle East Economic Digest.
However, as the region's once-booming real estate market slumps amid falling prices and a growing number of layoffs in the construction and financial sector, some of the Emirates' leading developers are being forced to review project requirements.
Morgan Stanley says property prices in Dubai have fallen by an average of 25% and 20% in Abu Dhabi since their peak last September. "The biggest drop has been in the high-end property segment, with average prices down 1% in 2008 and 35% since the peak," the report says.
Last week, HSBC (HBC) said Dubai is delaying or canceling almost 60 projects worth $75 billion, particularly in high-end residential and commercial developments.
In its note on Arabtec Holding , one of Dubai 's largest construction firms, HSBC lists 59 projects that are currently under review, including eight that have been canceled.
According to Morgan Stanley, government-owned developer Nakheel has five projects on hold, including the Nakheel Harbour & Tower, a one-kilometer-tall tower slated to be the world's tallest, announced at Dubai 's Cityscape event in October. Nakheel is slowing construction of three
palm-tree-shaped islands off the Dubai 's coast.
The report also lists Meraas Development's Jumeirah Gardens City project,also announced in October, on hold.
Five projects at the $110 billion Dubailand development, which was billed to be the pinnacle of the Dubai 's tourism draw, are on hold or canceled,including the $2.2 billion Universal City development that was destined to be one of the world's largest theme parks.
The HSBC report said The Falcon City of Wonders project that was to include a replica of The Eiffel Tower, The Tower of Pisa and The Taj Mahal amongst other "wonders" of the world has been canceled.
The following is a list of U.A.E. real estate projects that have been delayed or canceled, according to Morgan Stanley's Jan. 30 U.A.E. property report:
Project Developer Value ($Mln)
Jumeirah Gardens City Meraas Development 95,000
Mohamed Bin Rashed Gardens Dubai Properties 55,000
Nakheel Harbour & Tower Nakheel 38,000
Mudon Development Dubai Properties 21,000
Culture Village Dubai Properties 13,600
Palm Deira Nakheel 12,500
Al Salam City Tameer Holding 8,300
Al Burj Tower Nakheel 8,160
Universal City Dubailand 2,200
Emerald Gateway Abu Dhabi Municipality 1,907
Meydan Racecourse Meydan Development 1,300
Waterfront Living Omniyat/Investate 953
Aqua Dunya Dubailand 900
Al Falah Aldar 724
Royal Bay VIP Waterfront 490
Crystal Towers Dubai Properties 462
Al Kaheel Park Dubailand 436
Bristol Towers Deyaar 408
Dusit Emirates Saray Al Osaimi 408
Trinity Heights Pavillion Holding 215
Marjan Island Hotel,Residential AAKAR 163
Warsan Estate Emaar 163
A1 Tower Ali Moosa & Sons Group 90
Great Dubai Wheel Dubailand 70
Dubai Promenade Nakheel NA
Dubai Waterfront/Badrah Devt Nakheel NA
Global Village Dubailand NA
Dubai needs to adjust its economic policies in order to reduce a “perilous” dependence on trade with India and Iran, according to a report by the government-backed Dubai Economic Council.
In an assessment of the emirate’s trade policies published on Monday, the DEC said other regional centers such as Qatar, Abu Dhabi and Bahrain could grab a share of Dubai’s lucrative export and re-export trade unless the emirate diversifies its trading partners and reduces its dependence on trading in gold and jewellery.
“Dubai’s concentrated trade activities with India and Iran are perilous,” the report said. “In the event of changes in trade regulations, regime or preferences in these countries, it has the potential of undermining the future sustainability of Dubai as a regional trading hub.”
Dubai has since the 1990s positioned itself as one of the Middle East’s largest trading hubs, with total non-oil trade rising 13% in 2012 to 1.235tn dirhams ($336.25bn). Yet 70%, nearly two-thirds, of its trade is done with India and Iran, and the bulk of its trade by value is in gold and jewellery, making Dubai vulnerable to tightening global sanctions on Iran and any changes in India’s policies on gold imports, the report said.
Aside from diversifying its trade partners, Dubai must prioritise exports of manufactured goods and machinery, which currently make up a “negligible” amount of its total trade, the DEC said. It also suggested that Dubai should follow the lead of Hong Kong and Singapore in their transition from low-tech exporters to exporters of technology-rich products such as electronics, biotechnology, pharmaceuticals and precision engineering.
The DEC is the economic consultancy arm of the Dubai government.
The report noted that Abu Dhabi, Qatar and Bahrain are taking steps to improve their ports and trading infrastructure, and could easily grab a greater share of Dubai’s re-export trade unless the emirate adjusts its policies.
“Evidently, Dubai ports and airports have the advantage of being already in place and competitive for international standards. However, if not supported by adequate trade policies, such advantage may erode,” the DEC warned.