Published in the Monday, December 8, 2008 Edition of By Kirstin Anderson
The economic crisis continues to create a ripple effect across the world, leaving few corners untouched. The Middle East, which many thought would be immune to the economic troubles, is beginning to feel the effects.
The United Arab Emirates (UAE) in particular, which has seen unprecedented development and property values in recent years, is cutting jobs and scaling back major projects. Furthermore, a recent article in The Economist stated, "Some nervous bankers think property prices could fall by 80 percent or so in the next year or so."
Since winning independence from Britain in 1971, Dubai has tried to position itself as a world class tourism destination. Dubai's ruling family has invested much of the country's oil money in a sovereign wealth fund to accomplish this goal.
A sovereign wealth fund consists of a country's excess reserves from budget and trade surpluses, or in the UAE's case, revenue generated from exporting natural resources. The money is then invested in other types of assets, such as real estate, to protect the country from being dependent on its primary industry. This investment has helped the country diversify its economy and create a number of manufacturing and service jobs, mostly associated with real estate development.
Dubai is already home to the world's largest indoor ski resort, despite being located in the desert where summer temperatures regularly reach triple digits. Developers and builders have called for everything bigger and bolder to build the world's tallest skyscraper. They are also planning to build the world's most expensive airport and largest shopping mall.
Already under construction is a series of artificial islands known as the Palm Islands, which will be shaped as palm trees and be visible from space. The first island, Palm Jumeirah, is complete, and unveiled its flagship resort last week to a fireworks display and lavish celebrity party. The islands were commissioned by Sheikh Mohammed bin Rashid Al Maktoum, the prime minister and vice president of the United Arab Emirates.
