This morning, this headline popped into my regular Dubai Google Alert:
Excellent, I thought to myself. This is the remainder of the resurrection of Dubailand, the part that features a medley of theme parks across the size of New York City, now with a six-times-as-big replica of the Taj Mahal. But the story actually referred to an entirely new complex of theme parks, this one being beside Jebel Ali port.
The $2.7 billion development will “include an adventure park featuring Hollywood brands, a marine park, a children’s park and a night safari,” according to Reuters. “Meraas has formed partnerships with several major film studios in Mumbai to obtain content for the Bollywood Parks section, which will include a theatre showing Broadway-style musicals.”
Broadway musicals with Bollywood beats! This is something even Disney hasn’t thought of. The announcement of BollywoodLand comes a few days after Sheikh Mohammed, the ruler of Dubai, said Dubai would be building a new city within Dubai, named after himself. No price tag was put on Mohammed bin Rashid City but it is planned to be home to the ‘Mall of the World,’ which would usurp Dubai Mall as the world’s largest shopping mall, which is currently next to the world’s tallest tower Burj Khalifa, which itself features the world’s tallest dancing fountain. The development will also include a park 30 percent bigger than Hyde Park in London and more than 100 hotels.
Each of these stories, especially those run by local media, contain quotes from analysts espousing the same sort of wisdom: The worst of the economic downturn is behind Dubai. Laissez les bons temps roulez!
But some party-pooper journalists in the international business press have provided some caveats in the Dubai-is-back frenzy. Reuters points out that Dubai entities have nearly $50 billion of liabilities between 2014 and 2016 and “given the lack of major asset sales or haircuts, there has been little progress on the de-leveraging front.”
In its restructuring proposal in July 2010, Dubai World said it needed time for assets to recover in value in order for it to sell them and use the cash to pay off its debt. Under this plan, which was finalized in March 2011, between $1.3 and $2.3 billion would be raised between 2010 and 2012 by selling assets such as through P&O Ferries and Gazeley, a warehouse developer.
But the story says that a lingering weak global economy has meant that these sales have not gone ahead as planned, and if they did, the values weren’t what they were hoping for.
“The main issue is the depressed value of the international portfolio. Local assets are flourishing and doing great business but we haven’t seen any credible asset sales so far which can help reduce the debt burden,” Reuters quoted a senior Dubai banker as saying. “The most likely situation we see is Dubai going to the banks and again saying they have no money to repay the debt.”
So, money is still scarce to pay off debt but billions are available to construct new and ever-larger developments? Does Dubai need 100 more hotels? I’m no Alan Greenspan but, even with all the superlatives, it sounds like irrational exuberance to me.