Saturday, September 12, 2009

The end of the World?

Credit crunch signals end of The World for Dubai’s multi-billion dollar property deal

'The World' project

England is deserted, Australia and New Zealand have merged, and the man who bought Ireland has killed himself.

They were designed to make Dubai the envy of the world: a series of paradise islands inhabited by celebrities and the super-rich reclaimed from the azure waters of the Arabian Gulf and shaped like a map of the Earth. It was called The World.

As millions of tonnes of rock were dumped into the sea for the foundations, timely leaks suggested that Brad Pitt and Angelina Jolie were to buy Ethiopia, Sir Richard Branson was tipped to occupy England, while Rod Stewart would border him in Scotland.

Instead it has become the world’s most expensive shipping hazard, guarded by private security in fast boats and ringed by warning buoys to keep the curious away. A development that was meant to send Dubai’s star into the firmament of First World cities has been left to the mercy of the waves and the baking winds.

Mile after mile of breakwater built from boulders brought hundreds of miles by ship has been laid, but inside its man-made lagoon, work has completely stopped. The expected map of the world of 300 islands is instead a disjointed and desolate collection of sandy blots — a monumental folly just out of sight of Dubai’s shore.

Those who bought into what was the world’s most ambitious building project were not celebrities. Many were more ordinary investors who put down 70 per cent deposits, some of them Anglo-Indians. John O’Dolan, who fronted a consortium that bought Ireland in 2007 for $38 million (£27 million), committed suicide earlier this year. The others have little prospect of seeing a return. Now The World has stopped they can’t get off.

“The World has been cancelled. It doesn’t even look like the world. Basically there is one island that is maintained that is said to be owned by the Sheikh [Dubai’s ruler] and the rest looks like a pile of muck,” said one local property agent.

It is the starkest example of a financing crunch that faces the emirate but many other projects are also in jeopardy. In the United Arab Emirates (UAE), of which Dubai is a part, about $300 billion of building is on hold after prices began tumbling. Abu Dhabi, Dubai’s oil-rich neighbour, is helping to support it through the crisis, so far to the tune of about $10 billion. Another $10 billion is likely to follow soon, and more may follow.

Property is not the only dark spot in the UAE. In the nearby emirate of Sharjah the credit crunch turned off the lights this week. Planned power stations have not been built, and as a result businesses and houses were left without electricity at a time when daytime temperatures were pushing 50C.

The result is a chastened Government, stung by recent criticism in the international press that Dubai itself is one big folly.

In a rare appearance in front of the media this week, Sheikh Mohammed Bin Rashid Al Maktoum, Dubai’s ruler and the UAE’s Prime Minister, vowed to steer the emirate through its troubles and pledged to further rein in extravagant developments. Officially, however, not a single project has been cancelled — just delayed.

“I don’t blame anybody. Some papers try to write this but they are forgetting their problems [in their own countries]. . . But people only throw stones when a tree has fruit,” he said.

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