Economist.com Cities Guide: Dubai Briefing - February 2006

News this month

Danish boycott

United Arab Emirates officials have condemned a Danish newspaper's decision to publish cartoons depicting the prophet Muhammad. The cartoons have inspired violent protests by Muslims around the world, particularly in the Middle East. Mohammad Nakhira al-Daheri, the UAE's minister for justice and religious affairs, characterised the cartoons as “cultural extremism”. A number of prominent UAE supermarkets, including Carrefour, a French chain, removed Danish goods from their shelves as part of an unofficial boycott. UAE nationals and Muslim expatriates also staged a number of peaceful protests against Denmark.

But the UAE's response to the matter has been notable for its moderation: the boycott has clear limits, revealing Dubai’s liberal approach towards trading partners, and the street protests were subdued relative to those in other Arab countries. Danish diplomats said that while the boycott was hurting Danish companies that sell consumer goods, such as Arla Foods (maker of Lurpak butter), Danish firms that supply business-to-business goods and services were largely unaffected. AP Moeller-Maersk, a Danish shipping line, is one of the most active carriers serving the UAE.

Kingdom come

The Dubai International Financial Exchange (DIFX), the emirate's new stockmarket, received some much-needed good news when Prince Alwaleed bin Talal, a Saudi billionaire, announced plans to list one of his companies, Kingdom Hotel Investments. Kingdom executives praised the exchange's strong regulatory environment, and bankers estimate the listed company could have a market capitalisation close to $1 billion.

Since its launch in September, the exchange has been something of a damp squib. Investcom, the only stock listed, did not trade for months. Nine index-tracking funds received similar short shrift from investors. Privately, investment bankers and chief executives were growing concerned about this lack of trades. But matters have improved since late January, when two high-profile bonds were listed on the exchange. This included the world’s biggest Islamic bond—a $3.5 billion sukuk (which pays a profit rate, rather than an interest rate) from the state-owned Dubai Ports, Customs and Free Zone Corporation to help finance a planned acquisition of P&O ferries. Then Barclays Capital, one of the world’s leading investment houses, got a licence to be a broker on the bourse, and HSBC traded Investcom on the DIFX for the first time. Bourse officials admit the exchange has a long way to go before it achieves critical mass, but crow that about 15 companies have firm plans to list by the end of 2006.

Foreign investment

At the World Economic Forum's annual meeting in Davos in late January, Sheikha Lubna al-Qassimi, the UAE’s economy minister, announced that the Emirates was keen to attract more direct foreign investment. She added that foreigners would soon be allowed to own up to 75% of UAE firms. The limit is now 49%, except in the country’s free zones such as Dubai Internet City (home to the likes of Microsoft and CNN), where 100% foreign ownership is permitted. The UAE's Ministry of Economy and Planning is preparing a new commercial law with these changes, which should be in place by the first quarter of 2006.

Sleeping rough

Spiralling rents for homes in Dubai have forced some low-wage Asian expatriate workers to sleep in their cars. The Gulf News, an English-language daily, reported in February that a growing number of men spend the night in their vehicles, paying around Dh60 ($15) per month for access to bathrooms. They are priced out of Dubai's rental market, where real-estate rates increased by around 40% in 2005, according to property brokers. The problem is exacerbated by the fact that, while Dubai is witnessing a construction boom, developers favour luxury apartments and villas, leaving little accommodation for unskilled and semi-skilled workers, mainly from India, Pakistan and the Philippines.

Russian arrest

On February 6th Dubai police arrested Alexander Kukovyakin, a Russian who is believed to be a leading member of an organised crime group based in Yekaterinburg. Few details of the arrest were published by Itar-Tass, a Russian news agency, but Russia is seeking Mr Kukovyakin’s extradition.

Dubai is increasingly popular with Russians, many of whom have set up businesses in the emirate, or visit on holiday. They are becoming significant buyers of property in Dubai, with some local luxury developers holding road-shows in Moscow. Russian women also make up a significant proportion of Dubai’s prostitution industry, giving rise to concerns that organised Russian gangs are operating in the emirate.

Catch if you can

February 2006

Hussein Madi

February 13th—March 20th 2006

Hussein Madi is a prolific Lebanese painter whose fractured, figurative works and exuberant use of colour have earned him the title “Picasso of the Orient”. In this three-week show at the Fairmont hotel, visitors can appreciate Mr Madi's wide-ranging command of media. In four decades, there have been 46 solo shows of his paintings, graphics, prints and iron sculptures, and he has exhibited in such places as Beirut, Tokyo's Ueno Museum, the Venice Biennale and the British Museum’s permanent collection.

Artspace, the Fairmont Dubai. Tel: +971 (0)4 332 5523. Open: Sat-Thurs, 10am-8.30pm. See the gallery's website.

More from the Dubai cultural calendar