Elsewhere: Miracles on the Sand

Gigantic Projects

All market operators active in Dubai maintain close ties with the emirate government. Take investors, for example. The largest investment firms in the region are Dubai Investment Group (DIG) and Dubai International Capital (DIC), which is part of Dubai Holding. Government-backed Dubai Ports World, Emaar Properties и Emirates Telecommunications Corporation (Etisalat), too, play a significant role in domestic economy. “All those investment vehicles pursue common objectives but employ various strategies in terms of investment risk distribution and earnings,” says Suresh Kumar, executive director at Emirates Financial Services. What is common in those strategies, however, is that each is driven by the desire to pursue the most ambitious projects in their industry. Some succeed.

Emaar Properties, for example, develops what is to become the world’s tallest building – Burj Dubai. Its exact height is kept strictly confidential but Ivan Bruyninckx of a Belgium construction company involved in the project has confirmed to Vedomosti, that it will be over 800 meters, or 160 stories tall. The tower will provide a total of 279,000 sqm of space and will feature a podium of 186,000sqm. The developers plan to use 145,000 cubic meters of concrete to build the tower and 115,000 cu.m. for the podium. The architect is Skidmore, Owings & Merrill LLP. The development is carried out by Emaar Properties and three contractors – Belgium’s Besix, Korea’s Samsung and Dubai-based Arabtec. The U.S.-firm Turner Construction is the manager of the project.

A hotel will occupy the lower 38 floors of the building. Ivan Bruyninckx does not rule that the hotel will be operated by some regional hotel chain. “Local hotel chains are increasingly active on the market,” he notes. “While earlier foreign participation was welcome, nowadays regional operators seek more independence.” Upper floors through 108 will have private apartments. Floor 123 will contain a public observation deck. Offices will be situated on the upper floors 124 through 153.

Bruyninckx says the irregular V-shape of the tower is optimal for a high-rise, as three wings surrounding the core of the building steady the structure, with each wing resting on two others. Besides, such a shape increases the glazing area. The possible effects of seismic disturbances and wind on the tower have been thoroughly examined. Depending on the height in 50 years the lower part of the building will have moved by 0.54 meters (the upper pat of residential zone, at the height of 375.3 m); the office section by 1.25 m (569.7 m). In other words, annually the building will sway only by 1 cm in residential section and 2.5 cm for office zone. The tower will be surrounded by an artificial lake. The project estimated to be worth $876 million is expected to be finalized in December 2008.

The World – Mad World

While Dubai residents may as well do without a seaside villa it is highly unlikely that foreign buyers will. To meet their requirements local developers have come up with an idea to build artificial islands. Luxury consumers have long got used to the celebrated ‘palms’ of Dubai - the Palm Jumeirah and Palm Jebel Ali, whereas a new complex of privately owned islands – the World – is striking in originality of its concept and appeals to buyers willing to come into possession of a detached piece of land.

“The World” in the Persian Gulf is modeled on the real world, but built on a smaller scale with and slightly changed. It has Africa with Congo and Mozambique, South America with Santiago and Cuba, Asia with Moscow and St. Petersburg (locals do not think that European Russia is a part of Europe), the Bolshevik Island, Beijing, Thailand and Lebanon, Europe lacking Central and Eastern European countries, Antarctica, Australia and North America with New-York, San-Diego, Los Angeles and Colorado, but with no Washington…

The construction firm – government-backed Nakheel – claims in its official reports that the general plan of the project has yet to be finalized and subject to further changes, as well as the shape and names of the isles.

Infrastructure is the Key

Considerable private and government investments are poured into the development of transport infrastructure. Dubai caters first and foremost to higher-income consumers. Public transport – buses – provide transportation services chiefly for low-income residents. Official reports say that less than 5 percent of the 1.4 million population of the emirate use public transport.

Meanwhile, Dubai’s car fleet is growing annually by 45,000 vehicles. Admittedly, the government is set to change the situation and encourage people to use public transport. The Dubai Roads and Transport Authority, RTA, plans the development of light metro. Works to build 35 stations were launched in February 2006. Head of the Dubai Metro, Abdul Mahid Haja, says that the network will be launched as soon as by February 2009 and will have a daily passenger capacity of 1.2 million, or 355 million per year. The project will help ease congestion, boost passenger flow and improve living standards for low-income population. The government hopes that the share of public transport will grow from 4.7 to 17 percent over the next 15 years.

Economic Preconditions

Some economists put Dubai’s economic achievements down to the soaring oil prices. Optimistic forecasts put the rate of growth at 6 to 10 percent over the next few years. Indeed, statistics are quite reassuring: the Persian Gulf monarchies are expected to generate a record $305 billion in oil revenues this year, five times more than in 1998. The IMF analysts forecast an average annual current-account surplus of $470 billion over the next five years (assuming an average oil price of $59 a barrel).

The fast-growing Asian economies – China and India – are responsible for a large portion of the rise, according to economists. Oil prices grew by 42 percent in 2005 from 2004, which enables the Persian Gulf nations to accumulate free cash and invest them in local economies. The UN report “World Economic Situation and Prospects 2006” says that a considerable share of these capital outflows have been invested in the economies of Jordan, Lebanon and the United Arab Emirates, particularly in the real estate sector and financial markets, thus contributing to the surge in asset prices in those markets.

David Butter, chief energy analyst at the EIU (Economist Intelligence Unit), agrees. The Persian Gulf nations have made significant achievements in diversifying their economies, therefore a considerable share of oil and gas revenues are invested in local economies, he says.

Kuwait’s IFA Hotels & Resorts, aware of prospects of investing in the UAE economy, is expanding its presence in Dubai’s retail sector. The company’s high-rise seaside residential project Laguna Tower - undertaken jointly with the Swiss Movenpick Hotels & Resorts has proved especially successful. The 40-storied complex provides offices, cafes and restaurants, sports facilities with large swimming pools, was sold out much sooner than planned. The lower stories house a 5-star Movenpick hotel, floors 9 through 39 are occupied with comfortable apartments. Upper floors provide 12 penthouses. The complex owned by IFA Hotels & Resorts, is operated by Movenpick Hotels & Resorts. Co-investors are guaranteed an annual income of 8 percent during the first three years, whereupon they will be entitled to 50 percent of rental revenues.

At the same time, oil dollars are not the only source of revenue for the UAE on the whole and Dubai in particular. The rapid growth of the securities market has been registered in the UAE. High demand for real estate and rapid development of construction know-how have resulted in housing rent increase by 20-40 percent across the country. Prices for construction materials also grew. As a result, real estate remains the most attractive investment target in the UAE.

D?j? vu

The main problem the emirate is facing is the shortage of skilled workforce, especially in services sector. Seeking to keep their jobs migrants from other Asian countries willingly learn English, being aware that language and communication skills are a key to success.

Building workers is quite another matter. Most of them are migrants, too, though less skilled. Workers from India, Pakistan, Turkey and Egypt work on Dubai’s building sites. The work continues even on hot summer days. The world is waiting for a new miracle and Dubai is eager to live up to the expectations.

Such working conditions, of course, tell on builders’ health. Protests at Dubai’s construction sites receive wide media coverage, forcing developers to rethink their human resources policies, in particular, to exercise caution and not employ more than 1,000 workers from the same country on one site.

But the situation in Dubai is hardly unique. Moscow’s Soviet-era high-rises, too, were built mostly by convicts and war prisoners. Today, most builders employed on Moscow construction projects are non-Moscow residents, migrants from other parts of the country and former Soviet republics. Measures to protect their labor and social benefits leave much to be desired. But unlike their counterparts in Dubai, Moscow developers still fail to provide interpretation services to non-Russian workers. Developing architectural miracles is impossible without interpreters who could clearly explain the task to the builders.

The Middle East is something more than just oil dollars and hot spots, it is something much more than that, something as eternal as the world. Take The World project for example. Well-known cities and isles. We have already seen something like that before. For example, the U.S. too, has its Moscow and St. Petersburg… But Dubai is only an emirate and its role in the global economy remains insignificant, no matter how enormous its potential is.

Dubai does not appear in the UNCTAD ratings. Although, the Institute of International Finance, IIF, forecasts the total export from the Persian Gulf economy in 2006 to reach $416 billion, which approximately equals the total exports from Brazil, India and Russia.

Still, nothing can prevent Dubai from investing in the development of architectural masterpieces. But it has to be taken into account that glory may be transient. Architects who create those masterpieces go down in history while the names of rulers in whose times those projects appeared, alas, sink into oblivion. The only exceptions are, perhaps, Baron George Eugene Haussmann, the Prefect of the Seine, and Moscow Mayor Yuri Luzhkov, as well as Egyptian pharaohs. Who knows, maybe the names of Dubai rulers will also appear on that list.