Ferris wheel mania

How did the Ferris wheel become the must-have municipal toy? I was amused to read in the Times of India over the weekend that apparently Ahmedabad is the latest city to be infected with this mania: “It was during one of the Vibrant Gujarat summits that the company Saloria Chartered Architects of London, one of the top 100 architect firms of UK and right holders of equipment technology, had proposed a viewing wheel and recreation zone modeled on London Eye, or Millennium Wheel. The finer details of the agreement between the construction company and Ahmedabad Municipal Corporation (AMC) are taking shape with talks on revenue model, space sharing and ticketing. The site for the project will be the Sabarmati riverfront, claimed a senior AMC official.”

To be sure, converting talk out of Vibrant Gujarat into action has been somewhat shy of 100 percent. So perhaps birds-eye views of Ahmedabad from the banks of the Sabramati are not imminent.

The timing is interesting as Dubai also unveiled plans last week to build the Dubai Eye. Unlike Ahmedabad’s still-unnamed ride which would just be a replica of the 135-meter London Eye, Dubai developers plan to construct the world’s largest ferris wheel at 210 meters. Natch.

The proposal as unveiled is to build – you guessed it – a luxury mixed-use shopping/entertainment/hotel complex on what was the only open beachfront in New Dubai. (Because, really, there’s no need for a public park in Dubai. We must remedy the dearth Dior and Jimmy Choo boutiques. More sheisha cafes and Cinnabon outlets for everyone!)

We all know how I feel about Dubai’s addiction to the shiny-object economic development model, so I leave the last word on this to Alexander McNabb over at Fake Plastic Souks, who has already written a great post of Dubai’s Ferris-wheel courtship.

Irrational exuberance, Dubai-style

This morning, this headline popped into my regular Dubai Google Alert:

“Dubai plans $2.7 bln theme park complex”

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.

Fire!

Dubai woke up Sunday morning with a fire raging through a skyscraper in the Jumeirah Lakes Towers community. As I scrolled along Facebook, I realize the building looked familiar. Hey, that’s where I used to live!

The fire began at 2 a.m. and wasn’t put out until well in the day. It took firefighters 20 minutes to get there. I’m not sure if that meets acceptable levels of response times for high-rise fires. New reports over the past two days have quoted residents saying sprinklers and fire alarm systems failed to activate – outrageous considering there was a massive fireball above their heads. Amazingly, there are no injuries or deaths.

The spark is still unknown but what contributed to the fire spreading so quickly was the building’s cladding, something that is a common feature on buildings here. The Gulf News ran a story last May after there were three high-rise fires in Sharjah, saying that about 500 buildings were constructed with this cladding. It’s not fire-resistant which I imagine would break fire code in the U.S. Builders here preferred to use it because it’s cheaper. These claddings are made of low-density polyethylene, a petrochemical product that burns within minutes compared to certified fire-retardant panels that repel fire. There are no civil regulations that prevent this.

If we were still living there, the fireball would have melted off our eyelashes and engulfed our apartment in smoke and soot.

Earlier this year, a building in Tecom and another in Dubai Marina went up in flames as well. The culprit? Cladding that is, in effect, kindling. And then this week we have the fire in JLT. It turned out that it wasn’t my building but the building right to the front and side of us. If we were still living there, the fireball would have melted off our eyelashes and engulfed our apartment in smoke and soot. I used to wonder about these buildings, what would happen if there was a fire. I knew from experience that they were poorly constructed. It was brand new when we moved in but nearly immediately things began falling apart: sewage smells coming from inadequately laid water and wastewater pipes, the kitchen light fixture that suddenly had water pouring through it.

So, let’s recap: Hundreds of buildings in the U.A.E. are wrapped in highly flammable material. There are no regulations preventing this. And even though at least six recent fires were made worse – resulting in people’s deaths and untold damages in people’s health and property – there are no regulations preventing the use of this material or forcing building owners to replace the cladding with fire-retardant material.

And now, according to an article in The National this morning, Dubai Municipality is saying that since the building is in a free zone – an area where foreigners are allowed to purchase properties – Dubai is essentially not responsible for what happens there.

Given all this, why would anyone live in a high-rise here?

The U.A.E. media laws and free speech

The media law in the U.A.E. just got broader, and stricter.

Matt J. Duffy, a former journalism professor at Zayed University who has personal experience with the difficult balancing act regarding free speech in this part of the world, gave a good summary of the change here: “The revision, published in full in Gulf News, criminalizes anyone who uses a electronic means to ‘deride or to damage the reputation or the stature of the state or any of its institutions, its President, the Vice President, any of the Rulers of the emirates, their Crown Princes, the Deputy Rulers, the national flag, the national anthem, the emblem of the state or any of its symbols.

The decree also offers penalties ‘of imprisonment on any person publishing any information, news, caricatures or any other kind of pictures that would pose threats to the security of the state and to its highest interests or violate its public order.”

In short, Duffy writes, these restrictions, of course, are incredibly broad and will surely lead to even more self-censorship in the United Arab Emirates. Any legitimate criticism of the government could conceivably violate ‘public order.’ Better to just stay quiet while on Twitter, Facebook or YouTube lest one step across this nebulous line set up by the new law.

A friend posted on Facebook asking if comments against Du or Etisalat, the country’s two telecom providers which have inspired many a social media rant over poor service, would also count as forbidden speech. I think it might be – both are government entities.

The new provisions came out just as state media issued an edict updating media laws just as the Abu Dhabi Federal Appeals Court upheld a decision by the U.A.E. Ministry of Interior to strip seven Emiratis of their citizenship earlier this year.

The men had been agitating on Twitter and other online sites calling for greater political participation. Nearly 70 Emiratis have been detained by authorities since the start of the year and many of them are members of Al Islah, an Emirati Islamist group that seeks to have Islam play a more dominant role in everyday life in the U.A.E., which has long aimed to be a crossroads of East and West.

You can read my coverage for The New York Times on the detentions here, here, here and here.

 

Arabia-Asia: Two Regions At a Crossroads

For the last few months, I’ve been focused on editing a 10-story package for Forbes Asia exploring trade ties between Gulf and Asian companies written by the magazine’s contributors all over the Asian continent. We’ve covered a lot of ground, from Taiwan to Saudi, from Singapore to Oman. Please see below for a full listing of our coverage.

(Getty Images)

Karl Shmavonian, Forbes Staff

It’s debatable whether the historical metaphor is the Silk Route or Spice Route, but neither still matters literally, so we’ll say that Arabia-Asia is a commercial and financial link that is ever more important in the world economy.

In this special section, to correspond with the first Forbes Global CEO Conference in the Middle East (being held in Dubai), we take a look at parts of this expanding trade. We do so in the FORBES ASIA way, through profiles of several significant business personalities and the firms they founded.

The package was nimbly edited by Angela Shah, a writer and editor based in Dubai. Her work has also appeared in The New York Times, Time, and Newsweek/Daily Beast. For more about Angela, see www.angelashah.com.

Personalities play a big part in our coverage. Few people have as much boots-on-the-ground experience in both regions as does David Eldon, former chairman of HSBC Asia-Pacific. Since retiring from the bank in 2005, he has served as chairman of the Dubai International Financial Centre Authority. In our interview with him he discusses a variety of issues and affirms that “trade links are trending east and south, away from the West.”

Another dealmaker in the region is Pakistani Omar Lodhi, of Dubai’s Abraaj Capital. He opened the firm’s Singapore office two years ago and is leading Abraaj’s push into Asia, particularly the ASEAN countries, whose population and GDP offer plenty of opportunity: “These regional Asian economies are akin to Europe.”

Growth in the region isn’t just about finance–even the most ambitious high-rollers take a break for dumplings and spring rolls after a long day of puts and calls. Lin Chao Wen, founder of Gulf Royal Chinese Restaurant chain, started out as a failed serial entrepreneur in Taiwan in the 1970s before he eventually ended up in Saudi Arabia, bringing Chinese food to the masses. In the process he immersed himself in Arab culture, eventually converting to Islam and building himself a lavish home in Taiwan that resembles an Arabian palace.

Just as Lin could never have known as a young man in Taiwan that he would end up in Saudi Arabia, P.N.C. Menon, founder of Sobha Developers, could never have predicted while growing up in a small Kerala village in India that he would end up being a big player in Gulf-region real estate. Says the man who appeared on the FORBES Billionaires List in 2006: “It came from nothing. I went [to the Gulf] with $7. I must have been making a little bit of money here and there to make myself comfortable.”

Another Indian who has spent a significant part of his life in the Mideast is Shaukat Ali Mir, chief operating officer for international electromechanical projects at Mumbai’s Voltas, a Tata Group company. Voltas has been providing infrastructure (plumbing, firefighting, drainage and electrical systems) for the Mideast since 1976, and Mir came to the region in 1982. Voltas’ most prestigious, and perhaps most challenging, project was providing the electromechanical guts for Dubai’s Burj Khalifa building, the world’s tallest. Mir is globalization on two legs: “I grew up in India. I am living in the Middle East. My children live in Canada, and I plan to retire in Europe.”

Just as Voltas provides infrastructure for the rapidly expanding Gulf, Korea’s Doosan Heavy Industries & Construction is supplying power and desalination for the parched regionDoosan, which expects sales to hit $10 billion this year,  is increasingly going head to head with industry leaders GE, Alstom and Siemens in building power plants in overseas markets.

No survey of Asia and the Mideast would be complete without drilling into oil production. China’s biggest oilfield pipe maker, Hilong Holding,  is one of the few Chinese companies with manufacturing plants in the Middle East, its fastest-growing regional market. Hilong’s business in Saudi Arabia, its main target, is a classic example of synergy: You provide oil, I’ll provide the means to get it out of the ground–everybody makes money.

But enough about electrical systems, plumbing, turbines and dirty oil fields, what about technology and all those sleek toys that everybody wants? Vincent Lai and Andy Soh, who share a “curiosity in playing with cool stuff,” are the founders of Tocco Studios, a maker of touchscreens and software. In 2009, when Lai and Soh were students at Singapore Management University, a group of Omanis visiting the university’s business incubator wanted to learn more about the budding entrepreneurs’ screens. The Omanis were captivated, and soon Lai and Soh were doing business in the Gulf, as well as having a Singapore office.

With all the money being made these days, we would be remiss if we didn’t offer a profile of a company offering folks a way to show off their wealth. Jeweler Joy Alukkas, like our other Indians profiled, made his entry in the Mideast decades ago. He opened his first store in Abu Dhabi in 1987, offering his wares to expat Indians. Eventually he moved back to India, bringing back with him an intangible commodity: marketing and business practices accrued in the Gulf. His Joyalukkas stores had $1.33 billion in sales last year.

For slightly less upscale shopping, consumers can go to the Dragonmart mall, a mass-market oasis on the outskirts of Dubai.

Finally, we profile five companies that are learning how to navigate the cultural and business currents that join China and the Mideast. One of our snapshots is of China’s Shenguan Holdings, a maker of sausage casings that recently announced it would be offering halal meat to the Muslim world.

The Arabia-Asia economy is not on a glide path. It has famously been interrupted through the centuries but also in recent times, as global busts in commodities or real estate, or other home-market vagaries, got in the way of would-be Marco Polos. But the lure of the great crossroads and the increasing wealth they connect makes it likely that the tales here are just an inkling of many more to come.

Dubai’s ‘Mad Men’

For a recent feature for Gulf Life, the in-flight magazine for Gulf Air, I chatted with some of Dubai’s advertising executives. Some were part of the migration 30 years ago from Beirut – then the region’s ad hub – and were the founding fathers of the industry here today. Back then there was only one TV station, in Kuwait, and they communicated with clients via telex. And I’ll let Mr. Raad tell you about the Saudi commercial and the porn star.

Dubai is back!

Oh, happy days are here again in Dubai-land.

Cityscape DubaiGlobal — it got renamed “global” after Dubai’s market went comatose following the economic crisis in 2008 — was held here last week. It’s sort of like speed-dating for the real estate set. Developers set up booths, many with huge and incredibly detailed models of future developments, and investors stroll around, stopping at projects that catch their fancy. In the boom years here, as many as 40,000 people a day in the first two days would apparently visit the show and many, many of them bought properties while there.

This year, it seems the glory of those days has returned. Organizers have said that attendance was up by 25 percent this year compared to 2011 and the media fanfare trumpeted this year’s over-the-top projects, the sorts of developments that made Dubai famous in the first place.

All you are is a mausoleum. (Photo, Daily Mail)

Namely, the Taj Mahal Arabia: Just like Agra … but six times bigger! Plus shops and a hotel, (of course!)

“The Taj is made as a monument of love and we hope to promote this in Dubai as a major wedding destination,” said developer Arun Mehra in an article in the U.K.’s Daily Mail newspaper. 

The development is expected to cost $1 billion and is part of a “Wonders of the World” series in Dubailand, a theme-park extravaganza that supposedly will be the size of Disney World and Disney Land combined. Other “Wonders” include replicas of the Great Pyramid in Giza, the Hanging Gardens of Babylon, the Coliseum and the Great Wall of China.

Check out the developer’s promotional video:

 

Now let me just point out that precious little of any of that video is built right now. There are still major developments left unfinished from the boom years, including this one, their investors out of money and with nothing to show for their investment. Nakheel, the developer of the Palm Jumeirah, is changing contracts ad hoc and charging residents there new fees presumably because it needs the money. But nevermind to all that! What Dubai needs is its own version of Venice and its canals, and a development the size of the English city of Birmingham that includes London Bridge, Big Ben, St Paul’s Cathedral and the Houses of Parliament.

Dubailand is currently one big sandpit, the investor protections oft-discussed since the bust have yet to be proven in courts of law here, and one could debate whether the emirate needs more hotels and high-end luxury villas. Not that buyers care, it seems. Nevermind the disgruntlement on the Palm. For Nakheel’s latest development, unveiled just before Cityscape, word is that buyers gobbled up AED800 million ($271.8 million) worth of luxury apartments. Tales are already being shared of people selling their places in line to buy at new developments for AED80,000 ($21,780.) No doubt the flipping is happening fast and furious.

It seems the place has collective amnesia. Wasn’t this how Dubai got in trouble in the first place?

Look, I know that the Arab Spring has boosted Dubai’s fortunes; it continues to be a safe haven for both people and capital when turmoil strikes the region. The emirate’s economy overall is healing. But what about development that is not targeted to the speculator but instead to the end-user, the sort of investor that will stick around through the economic cycles and not disappear at the first whiff of a crash?

But my friend, V.P., thinks I’m being an idealist. “I think by now it’s no secret what Dubai is all about,” he says. “And this is Asia. The Asian mindset is different. It’s only money that counts. And it’s going to be like this for the next 30 or 40 years.

You can either be an idealist and try and fight it or you can enjoy the ride. No one’s going to listen to you when there is SO MUCH MONEY at stake.

I’m sure speculation and a gold-rush mentality have played a role in the development of most major cities. But is there any place where this philosophy represented the sum-total of development?

Ali Rashid Lootah, the chairman of Nakheel, the developer of the Palm mentioned above, doesn’t believe Dubai’s speculative real estate market was ever a problem. “It was a global crisis,” he said in an interview with the BBC. “It was not Dubai.”

 

The crackdown expands

My latest story in The New York Times about an escalation this week in arrests of Emiratis who are calling for more political freedoms and free speech rights. U.A.E. state security authorities say the men are a threat to the country’s stability.

 

 

Detentions of activists are reported in U.A.E.

DUBAI

By ANGELA SHAH

In the early hours of Tuesday morning, Mohamed al-Roken drove toward his local police station here to report that his son and son-in-law were missing. Along the way, he found himself surrounded by plainclothes security officers and detained, according to his family.

Mr. Roken, along with his son, Rashid, and son-in-law, Abdulla al-Hajeri, are 3 of at least 14 Emiratis who have been arrested since Monday morning by the United Arab Emirates state security apparatus, human rights advocates and family members said. Nearly two dozen activists are now being held by the authorities.

The arrests are part of a widening crackdown on U.A.E. citizens, some of them Islamists but also academics and stateless people known as bidoon.

“This may be a way to frighten opposition on all sides,” said Christopher Davidson, an expert on Gulf issues at Durham University in England.

This week’s crackdown comes days before the expected start of the Islamic holy month of Ramadan and highlights an increasingly public conflict in the Emirates.

Unlike many Arab countries, the Emirates have emerged largely unscathed from the unrest that has spread across the region from the Arab Spring that began 18 months ago.

But a debate on free speech and political freedom among Emiratis has emerged, as the leaders here try to maintain a balance between the more conservative character of their neighbors and a desire to preserve their status as a Western-style business hub.

While the trend among natives is still to keep quiet and enjoy the comfortable life provided by the rulers, a small group of activists is agitating for greater political participation — and drawing the attention of the authorities.

Bushra al-Roken, Mohamed al-Roken’s daughter, said the family received a phone call from her father at 1:30 a.m. on Tuesday.

“We couldn’t understand that much,” she said, “but we could hear voices and my father saying, ‘They’re taking me.”’

On Sunday, the state media issued a statement saying the authorities were investigating “a group of people who established and ran an organization which aims to commit crimes against the security and constitution of the country.” Members of this group have “connections with foreign organizations and agendas,” the statement added.

Mr. Roken, a lawyer, was defending several Emiratis who had been arrested on charges of threatening state security. Many of those arrested are members of Al Islah Reform and Social Guidance Association, which holds beliefs similar to those of the Muslim Brotherhood, the mainstream Islamic organization.

Many of these activists say they would like to see Islam play a more prominent role in everyday life in the Emirates, and they have also called for a more democratic political system in the country, a group of seven principalities ruled by hereditary emirs.

The authorities regard Al Islah as a homegrown proxy for the Muslim Brotherhood, a group that they see as gaining influence in the region — especially after the recent election of a Brotherhood candidate, Mohamed Morsi, as Egypt’s president.

The families of those detained are scrambling to find them. Asma al-Siddiq said her husband, Omran al-Redhwan, was arrested Monday morning at the Abu Dhabi Islamic Bank in Sharjah, where he works as a legal consultant. Ms. Siddiq said she had not heard from the authorities about the reason for her husband’s arrest or where he was being held.

“I am looking at social media sites, Twitter to try to find information,” she said.

The arrests followed the deportation to Thailand on Monday morning of Ahmed Abdul Khaleq, a resident of Ajman, the smallest of the emirates, who was one of the original activists arrested and tried last year.

The men, who were convicted in November of threatening state security and insulting the country’s leaders, were sentenced to three years in prison before being pardoned days after the verdict.

Mr. Khaleq was born in the Emirates, but he is a bidoon, or stateless Arab.

Estimates of the number of bidoon range from 10,000 to 100,000, human-rights advocates say. They belong to families with ties to other parts of the Gulf or Iran, or that failed to obtain citizenship when the United Arab Emirates was formed in 1971. They say they are cut out of the Emirates’ generous social welfare system and complain of discrimination in jobs.

Last month, Mr. Khaleq was given a choice of where to be deported — Bangladesh, India, Iran, Pakistan or Thailand. He chose Thailand, though he had no relations there, said Ahmed Mansoor, a human rights activist and blogger who was among the group arrested with Mr. Abdul Khaleq last year.

Dubai: ‘Digging Out of Debt’

My latest story is in Institutional Investor magazine, on Dubai reckoning with its debt hangover, three years after it announced it would not be able to pay its debts. Here is an excerpt to the story. The full link is available here for a limited time.

 

 

 

June 2012  •  Angela Shah

IN EARLY APRIL, DUBAI’S MUNICIPAL GOVERNMENT reported that the number of abandoned cars — the symbol par excellence of the once-high-flying emirate’s economic bust — rose by 10 percent in the first three months of this year from the same period a year earlier. But rather than seeing that indicator as a sign that the economy was taking a turn for the worse, leaders attributed the pickup to simple efficiency: The authorities now have three tow trucks to bring in vehicles, compared with just one last year.

The car repo business, with numbers that can be good or bad, depending on how you look at them, is a good metaphor for Dubai’s economic and financial condition. The emirate, which splashed on the global scene a decade ago with a flashy, money-is-no-object development philosophy, only to be brought down by the near-default of some of its flagship companies three years ago, has been quietly getting a handle on its debt problems. Since late 2009, Dubai and its government-related entities have restructured more than $20 billion of bank debt, nearly two thirds of the total, by arm-twisting creditors with a decree that resembles a Western-style bankruptcy restructuring. The emirate’s economy is also on the mend, with moderate growth buoyed by a rebound in tourism and trade.

Dubai may have bounced off the bottom, but it still has a long way to go to resolve its debt problems and return its economy to robust health. Government-related entities such as Dubai World, the conglomerate that set off the crisis in late 2009 by declaring a debt standstill, have rescheduled a large portion of their obligations, but they remain saddled with a massive burden. In its latest report on the United Arab Emirates, issued last month, the International Monetary Fund estimated that the overall debt of Dubai’s GREs — including bank debt, bonds and sukuk (Islamic bonds) — stands at $84.3 billion, or 60.4 percent of GDP. That debt mountain has declined by about $5 billion over the past two years, but the GREs still need to roll over an estimated $14 billion of debt this year.

Fully 10.6 percent of the loans held by Dubai banks are nonperforming, the IMF says, and that ratio could jump by another 5 percentage points this year if the authorities manage to reschedule the debt of other government-related entities. Although the real estate market shows signs of stabilizing, property prices have fallen by about 60 percent since 2008, and vacancy rates range from 20 percent for retail property to 30 percent for office buildings. Dubai is slowly healing, but there is no quick remedy for its troubles.

“The only way for Dubai to fix its problems is to grow the economy and generate income, and trade its way out,” says Neil Cuthbert, a senior partner at the Dubai office of law firm SNR Denton. “Over time it will happen. The interesting question is, how long will the banks be happy to carry on pushing out maturities?”

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