Economist.com Cities Guide: Dubai Briefing - September 2005

News this month

Cracking down

Dubai’s stock exchange has often seemed like a free-for-all, with authorities turning a blind eye to manipulation, insider trading and other market abuses. But this lax era may be over. On September 6th, the Securities and Commodities Authority (SCA) referred a case of market manipulation to the judiciary, implicating two UAE investors and a local brokerage firm. The investigation began a week earlier, when bourse officials and the SCA cancelled Dhs9.4 billion ($2.6 billion) worth of trades in Dubai Islamic Bank.

Pressure has grown to make business conditions more appealing to foreign investors, who tend to see the bourse’s lack of transparency as a problem. So many see the swift move of authorities to crack down on the investors, Zayed Zayed bin Owaidah al-Qubaisi and Ahmed Mugrin al-Kindi, as a good sign.

All for one

With the European Union in the throes of an identity crisis, the Gulf Co-operation Council (GCC), a six-country bloc loosely modelled on the EU, is advancing with plans to create a closer union. On September 14th, the United Arab Emirates central bank agreed to terms for a single GCC currency. The GCC settled that each member’s budget deficit may not exceed 3% of gross domestic product, and public debt may not exceed 60%—criteria that also appear in the EU's now-defunct “stability and growth pact”.

The UAE will meet these terms with ease: a major oil producer with a population of just 4.5m, the UAE routinely runs budget surpluses. But the agreement might prove taxing for some fellow members, particularly Saudi Arabia, which has consistently suffered deficits despite being a top oil exporter. The currency is scheduled for launch in 2010.

Pump blues

Faced with the surging price of crude oil, the UAE government hiked retail petrol prices by almost a third on September 1st. The move, which aimed to stem the heavy losses of local petrol distributors, raised the price of a gallon from Dhs4.75 ($1.29) to Dhs6.25 ($1.70).

The decision incensed Dubai’s UAE nationals and poor expatriates. Private cars are in effect the only way to get around Dubai, which has virtually no public transport. With soaring rents forcing more families to live outside the city, many have a long and expensive daily commute. But petrol retailers, which are state-owned, argue that prices in the UAE are still well below international norms—the market rate would price a gallon of petrol at about Dhs9 ($2.45). Whatever the merits of the move, it is sure to stoke inflation: Standard Chartered bank forecasts that consumer prices will rise by more than 6% this year.

Place your bets

Dubai seems intent on making its posh horse races even ritzier. On September 9th, Dubai’s government added Dhs22m ($6m) to the prize fund for the Dubai World Cup. The seven-race event, already the world’s richest day of horseracing, now has a purse of over Dhs77m ($21m).
Dubai’s officials are keen on maintaining the World Cup’s premier status. Horseracing is an important part of a marketing campaign to establish Dubai as a centre of trade and tourism: the city hopes to lure wealthy horseracing fans from Britain and Australia—two key sources of tourists and investors. The World Cup has its share of local enthusiasts too. Sheikh Mohammed bin Rashid al Maktoum, the Crown Prince of Dubai, reportedly spent $41m on 23 horses at a Kentucky auction in mid-September.

What will they think of next?

In line with Dubai's penchant for fantastical developments, such as the Palm Islands, a real-estate company unveiled plans on September 10th to recreate seven wonders of the world. Investors will spend about Dhs5.5 billion ($1.5 billion) to build life-size replicas of the pyramids, Taj Mahal and the Eiffel Tower, among others. The project, dubbed the Falcon City of Wonders, will also house shopping malls, office space, apartments and hotels. (Visitors may have the peculiar experience of shopping in the Great Wall of China.)

Falcon City is part of Dubailand, a multi-billion dollar government project to promote tourism. As the real-estate market becomes ever-more frenzied, developers are looking for any gimmick to set their projects apart. In July, Thani Investments, a local company, announced plans to spend about Dhs6.5 billion ($1.8 billion) building Golf City, a complex with five themed courses, golf villages, shops, a resort and a golf academy. Developers are banking on a surge of foreign visitors: Dubai, with a population of just 1.2m, expects to welcome about 15m tourists a year by 2010.

Catch if you can

October 2005

Ramadan

October 3rd-November 1st 2005

During Ramadan, the Muslim Holy Month, the pace of life in Dubai slows down as Muslims fast from dawn until dusk. Live music is banned, nightclubs are closed and it is illegal to serve alcohol during the day, even at top hotels. But the city comes alive at night, when bars re-open (at 7pm) and people of all faiths enjoy the nightly Itfar feast, a colourful occasion when Muslims break their daylong fast. Dubai’s Creekside area is particularly lively after dark, with stalls, cafés and street performers vying for the attention of passing crowds.

Business also changes during Ramadan, with many firms and government bureaus closed in the afternoon. Dubai’s thriving conference industry essentially shuts down for the entire month. Still, Ramadan provides excellent networking opportunities in the evening, when many prominent businessmen hold informal meetings in private tents, known as the majlis. An invitation to arrive at midnight to drink coffee, smoke shisha (hubbly-bubbly) and have an informal chat about a deal should not be passed up.

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