Economist.com Cities Guide: Dubai Briefing - June 2006

News this month

Diplomat freed

Naji al-Nuaimi, a diplomat from the United Arab Emirates, was held hostage in Iraq for two weeks after he was kidnapped near his country’s embassy in Baghdad on May 16th. He was released unharmed on May 30th, but the incident highlighted how the UAE is far from immune from the attentions of Islamic militants. A group calling itself Islam’s Banner claimed responsibility for the kidnapping. It demanded that the UAE withdraw its most senior diplomat from Iraq, and the UAE complied within days of Mr al-Nuaimi’s abduction. It also demanded the shutting down of al-Fayha, a UAE-based Iraqi television channel, but this was refused. Some Iraqis are unhappy with the UAE’s apparent support for the new American-backed, Shia-dominated government in Iraq. The UAE is a mainly Sunni Muslim country, but is a close ally of America.

Buying abroad

Emaar Properties, one of Dubai’s leading developers, has agreed to pay $1 billion for John Laing Homes, an American homebuilder. The move signals that Dubai-based companies are still keen to invest in America, despite widespread political opposition earlier this year to plans by Dubai Ports World to buy six American seaports. Alongside Emaar’s acquisition of John Laing, Istithmar, a state-owned private-equity group, unveiled two significant acquisitions in late May and early June: the Knickerbocker Hotel in Times Square, New York, for around $300m, and Loehmann’s Holdings, a retail chain, for a similar figure.

Off the peg

The International Monetary Fund (IMF) has called on the United Arab Emirates to end its decades-old pegging of the dirham to the dollar. Mohsin Khan, head of the IMF’s Middle East and North Africa unit, said Gulf states should consider pegging their currencies to a basket of currencies including the euro and Japanese yen. He said this would better reflect the fact that many of the UAE’s imports come from the euro zone and Asia, which has contributed to rising prices in the emirates in recent years through imported inflation.

The UAE is one of six members of the Gulf Cooperation Council, which has pledged to create a single currency by 2010. All six members, including Saudi Arabia and Kuwait, peg their currencies to the dollar, reflecting the importance of dollar-denominated oil revenues to their economies. Officials have hinted that they may loosen the dollar peg once the single currency is launched.

Targeting Pakistan

Dubai-based firms unveiled investments in Pakistan worth more than $40 billion, mainly in real estate, during a trip on May 30th by Sheikh Mohammed bin Rashid al Maktoum, the ruler of the emirate. Emaar Properties, of which the Dubai government owns a third, and Limitless, a state-owned company, both announced projects of around $21 billion in cities including Karachi and Islamabad. On top of this, Dubai Islamic Bank, in which the government is a major shareholder, announced plans to open 70 branches in Pakistan. These moves underline the strong ties between Dubai and Pakistan, which are two hours apart by plane. Dubai is also home to a large expatriate Pakistani community, which includes tens of thousands of low-paid labourers.

Just fine

Michael Ballack, a German football star, has been fined €60,000 ($77,000) by a court in his homeland, after he failed to declare tax on a bag he bought at Dubai International Airport. Mr Ballack reportedly paid around €2,000 for the bag during a training trip to Dubai in January with the German national team and fell foul of customs officers at Munich on his return home. He will appeal against the fine. Any sympathy could be tempered by the fact that Mr Ballack recently signed a deal with Chelsea, a London team, which will reportedly earn him $240,000 a week.

Catch if you can

June 2006

Dubai Summer Surprises

June 21st–September 1st 2006

Dubai Summer Surprises (DSS) is little more than a glorified sale. But the various sideshows in shopping malls—many of them aimed at young children—have proved popular with the region’s tourists since DSS was launched in 1998. This year’s summer shopping spree kicks off in late June, with hoteliers reporting strong advance bookings from neighbouring Saudi Arabia, Kuwait and Qatar. The DSS claims to have helped attract 1.5m visitors to Dubai in the summer of 2004, the latest year for which figures are available, up from just 600,000 in its first year.

Various locations around Dubai. For more information see the DSS’s website.

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