Economist.com Cities Guide: Dubai Briefing - August 2006

News this month

Standing by Lebanon

Dubai-based firms have pledged to maintain their investments in Beirut, even as Israeli aircraft bombed the Lebanese capital. Property firms including Damac Properties and Habtoor Group are building hotels and luxury apartments there, while investment banks such as Shuaa Capital own shares in Lebanese companies. "We see no reason to allow a short-term political situation to have an impact on our long-term investment in Lebanon," said Peter Riddoch, the chief executive of Damac. The Khaleej Times reported that firms based in the United Arab Emirates (UAE) had around $2.7 billion-worth of projects under development in Beirut.

Such public support for Lebanon underlines local hostility to the Israeli assault. Beirut is an increasingly popular holiday destination that has benefited from strong investment from financiers in Dubai, as well as oil producers in Saudi Arabia and Kuwait. The commitment by Gulf investors to stick by their plans is partly motivated by a high level of risk tolerance, but also by political sentiment. To abandon Lebanon in its hour of need would be seen as disloyal, and could cause real damage to a firm's reputation.

Gas trouble

Two of the UAE's most important energy companies, Dolphin Energy and Dana Gas, have reportedly been hit by supply concerns. The firms want to import gas from Qatar and Iran respectively to supply power stations in the UAE. But Dolphin Energy's plan-an undersea natural-gas line from Qatar to the UAE-ran into some trouble in early July, when Saudi Arabia complained that it crossed Saudi territory and "cannot be constructed without the agreement of the kingdom." Reports quoted a memo faxed by the Saudi government to the National Bank of Abu Dhabi, which is helping to finance the development. State-backed Dolphin Energy insisted the line runs "exclusively" through Qatari and Emirati waters. Dana Gas, a smaller listed energy company based in Sharjah, has also had some challenges importing gas. The Iranian government is reportedly blocking exports to the company because of a price dispute. Dana Gas denied this in July, saying that delays were due to "technical problems" on the Iranian side.

Despite its vast natural resources, the UAE plans to import cleaner gas to generate electricity. The gas produced in Abu Dhabi's own fields is of relatively poor quality, high in sulphur and not well suited to electricity production. The potential supply problems could have significant implications for the country's fast-growing energy needs.

Retailers needing therapy

Dubai's vibrant shopping community has turned its back on luxury goods, as a combination of falling stockmarkets, rising rents and the war in Lebanon have hit consumer confidence. A survey by Standard Chartered bank found that sales of luxury goods in July were about 20% below retailers' expectations. UAE nationals are feeling the impact of a stockmarket that lost over two-thirds of its value between November 2005 and July 2006. Many had borrowed heavily to speculate, and when the market turned, their debts left little spare cash for handbags and jewellery. Expatriates, meanwhile, have been hit by rising rents and school fees, and the city's large Lebanese community-renowned as the most fashion-conscious group in Dubai-has shunned shopping malls in order to send money home to those trapped in the violence.

Flower power

In keeping with its role as a hub for opulence, Dubai opened a huge flower warehouse in July. The state-owned Dubai Flower Centre can handle 180,000 tonnes of such perishables each year, offering a bridge between flower-producing nations in Africa and major markets in Asia and Europe. With temperatures soaring above 40ºC and humidity close to 100% when the centre opened in July, Dubai seems an unlikely location for an agricultural depot. But such considerations hold little sway for a desert city that is already home to one of the world's largest indoor ski slopes-with real snow. The flowers will be held in huge, air-conditioned silos close to Dubai International Airport before flying to their final destination.

Train takes strain

Dubai has announced a large expansion of its urban rail project, Dubai Metro, as increasing congestion on its roads threatens the city's competitiveness. The original plan, unveiled in 2005, was to build two lines across the city with 70km of track, at a cost of around $4 billion. However, the state-owned Al Bayan daily has reported that the project is to be expanded to four lines and 320km, at a cost of an additional $9 billion. Construction work has already begun on the first two lines, which are due to enter service in 2009. All four lines should be operational by 2012.
Convincing Dubai's car-mad commuters to use the new system won't be easy. The government hopes to entice middle- and upper-income passengers with air-conditioned and first-class carriages. There will also be carriages reserved for women and children. If that is not persuasion enough, the government will introduce road tolls, although the timing for this move has not been finalised yet.

Catch if you can

August 2006

The Complete Works of William Shakespeare (Abridged)

August 29th-September 1st 2006

One of London's longest-running shows enjoys a short stint in Dubai this summer. This acclaimed comedy covers each of Shakespeare's 37 plays in just 97 minutes. If you fancy seeing "Othello" presented as a rap song and "Titus Andronicus" as a cooking show, plus "Hamlet" performed forwards and backwards, head to the Madinat Jumeirah resort.

Madinat Theatre, Jumeirah. Tel: +971 (0)4 3666-550. Tickets: 135 dirhams ($37). See the hotel's website or the production's website.

More from the Dubai cultural calendar