Dubai back in mega-project mood after fiscal dive

Associated Press Modified: November 28, 2012 at 1:01 am •  Published: November 28, 2012
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DUBAI, United Arab Emirates (AP) — Dubai is suddenly rediscovering its old habits.

That means relentless hype and construction plans loaded with superlatives. Case in point: A proposed Taj Mahal replica four times bigger than the original.

Leaders, too, are back swaggering with a mojo that seems aimed to wipe away memories of the city's humbling fiscal collapse just three years ago.

"We do not anticipate the future," said Dubai's ruler Sheik Mohammad bin Rashid Al Maktoum in announcing plans Sunday for a new "desertopolis" that will bear his name. "We build it."

It all rings very familiar. The same type of super-charged ambition reshaped Dubai beginning in the 1990s and left an impressive legacy including the world's tallest skyscraper, a villa-studded island shaped like a palm, malls packed with top retailers and tourist and business networks that are the envy of the Middle East.

But it also helped drive the emirate over the edge.

The global financial crisis smacked Dubai particularly hard after years of increasingly shaky construction funding schemes, where state-linked developers often used money collected for one unfinished project to start another. As credit dried up, the deeply indebted Dubai government had to scale back sharply just to meet its bills. It took a $10 billion bailout from oil-rich neighbor Abu Dhabi in 2009 just to give it some breathing room to begin selling off assets and negotiating with creditors for billions more owed by the city-state.

Now — with another generation of outsized projects on the drawing boards — some are questioning whether the pre-bust creed of bigger-is-better still makes sense in a more cautious world.

The Great Recession pummeled the type of high-risk investors who would once sink money into a project that was still just a plot of sand and desert brush.

But Dubai is still betting heavily on long-term appetite for the kind of self-contained, mega-scapes that were among the main casualties of its fiscal meltdown. The new wave of projects also marks an important shift for Dubai away from housing-oriented developments toward more entertainment and tourism, particularly with visitors from China sharply on the rise. The proposed Mohammad bin Rashid City — named after Dubai's ruler — includes a shopping complex that will surpass the world's largest, the Dubai Mall, just down the road.

Nick Maclean, the managing director of property advisers CB Richard Ellis Middle East says the investment climate is on the rebound. Dubai's economy grew a healthy 4.1 percent for the first six months of 2012 compared with the same period last year, officials said Monday. But Maclean and others still cast wary eyes on frontier areas such as desert outskirts where many of the giant projects are planned.