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15/03/2009Dubai takes an economic nosedive

The wealthy Gulf state of Dubai has been hit hard by the global economic crisis.

Tens of thousands of workers have been laid off and forced to return to their homelands. The Dutch community in Dubai is also feeling the pinch.

Jan Demmink has lived in Dubai for 28 years. It's the pleasant atmosphere, the entrepreneurial spirit and the agreeable climate that keep him in the Gulf state. He witnessed the transformation of what was once a tranquil and prosperous town into the vast collection of skyscrapers that makes up modern-day Dubai. Under the leadership of Sheik Mohammed and his father Maktoum III, the emirate invested in the financial sector, tourism and real estate. The bigger, more expensive and more luxurious the better. Yet these are the very sectors that have been shaken to their foundations by the crisis and meanwhile Dubai has no major oil reserves to fall back on.

Financial nosedive
Jan Demmink works in the electronic security of complexes such as refineries, palaces and roads. His position is safe for the time being. "I work on long-running projects, so I have yet to feel the effects of the crisis," he explains. "But in construction you can see the signs already. A halt has been called to projects that were only started recently, or which have yet to get under way."

Dutch dredging company Van Oord is one of those in the firing line. The company hit the headlines worldwide with the construction of Palm Jumeirah, the first of Dubai's famous Palm islands and the construction of The World archipelago. Van Oord was all set to embark on a third island project, Palm Deira, an order worth 2.5 billion euros, the largest in the company's history. Part of the order has already been realised but the rest is on the back burner for the foreseeable future. The funding simply isn't there. Spokesman Bert Groothuizen says no one saw the rapid changes coming. "It was a nosedive. Especially in the fourth quarter of 2008. And I don't think these problems will be solved in six months' time."

Dubai at its Peak - PHOTO Faithful Chant
Dubai at its Peak - photo Faithful Chant

Business development manager Chris Rademakers, who works for Dutch firm Visser & Smit Hanab, sees the luxury and the frills slowly disappearing. Dubailand, an ambitious theme park twice the size of Disney World, will not be opening its doors any time soon. There are no buyers for the prestigious apartments on The World archipelago. But work on the metro system, roads and a new airport is continuing much as usual. "These are projects that directly benefit the country. Only the delivery dates have been pushed back."

Brain drain measures
Around 85 percent of Dubai's inhabitants come from abroad, a figure that includes some 6,000 Dutch expats, Mr Demmink estimates. A job is an absolute precondition for staying in Dubai. Being out of work automatically means having to leave the country. "This makes unemployment a relative concept," observes Mr Demmink. But the recent departure of workers can be seen on the streets. "All of a sudden there are houses to rent, something that was unthinkable only a few years ago. The streets are quieter now. There are far fewer cars on the roads."

Jan Demmink in DubaiIt's not only the lower echelons who are leaving. Over the festive season, media in Dubai reported thousands of luxurious lease cars being abandoned at the airport. Some expats left everything behind and headed home. The emirate now wants to amend the visa laws to prevent a brain drain. Managers and skilled workers will be allowed to stay on, even if they find themselves without work for a time.

Estimating exactly how bad things are in the country is no easy matter. The massive construction projects are financed by project developers, or with borrowed money and foreign investments. Last year, one of Dubai's leaders bowed to international pressure and admitted that Dubai has a total national debt of around 80 billion US dollars, offset by assets with a total value of 1,300 billion. Not a cloud in the sky, was the reassuring message. But these figures are almost impossible to verify and the government remains tight-lipped about bankruptcies and job losses.

Correction on the cards
Van Oord can no longer offer employment to many of its workers in Dubai. This will mainly affect personnel with local, temporary contracts. "That's sad," sighs Bert Groothuizen:

"We regard them as part of Van Oord. Some of them have been working with us for a long time, which means a great deal of knowledge and experience is being lost."

For a large number of Dutch nationals too, work in Dubai has come to a premature end. They have been relocated.

The Rotterdam company is expecting a fall in turnover of approximately 400 million euros in Dubai this year. A correction in the market was on the cards, concedes Mr Groothuizen. "The expansion in the world dredging market over the past four years was highly exceptional."

"Dubai is not about to become a ghost town," says Chris Rademakers: "It's a dip of two or three years. The project developers are taking time out. As soon as the money returns, building will continue." People are acting accordingly, he reckons. "There is still a lot of money around. Buildings are empty but the rent is six times higher than in Amsterdam. The luxury shopping centres are still packed. It's a case of "Crisis? What crisis?'" He doesn't fear for his own future either. "Our company is mainly involved in infrastructure, a sector where there are very few problems. I hope to stay out here for a few years yet."

Willemien Groot
Radio Netherlands

Photo credits: Faithful Chant; Ericsson Beach

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