Indebted Dubai puts on brave face for tower opening
Dubai opened the world’s tallest structure in a glitzy ceremony meant to put a brave face on crushing debt woes, leading some to wonder whether the tower is the emirate’s crowning glory or its last hurrah.
The $1,5-billion tower reaches up 828m, 200 storeys into the sky. It surpasses the next highest inhabited building, Taiwan’s Taipei 101, by more than 300m.
Dubai’s ruler, Sheikh Mohammed bin Rashid al-Maktoum, renamed the tower Burj Khalifa in honour of Sheikh Khalifa bin Zayed al-Nahayan, ruler of the emirate of Abu Dhabi, which has bailed Dubai out to the tune of $25-billion in the past year.
The bailout has fuelled expectations that Dubai will make concessions or cede some commercial power to its wealthier neighbour, whose ruler is also president of the United Arab Emirates.
Concerns about Dubai’s $100-billion debt pile, which has made Dubai’s stock exchange one of the world’s worst performing, overshadowed both the ceremony and boasts by the builder, Emaar Properties, that the Burj heralds a new dawn.
“The worry for Dubai is that the event will be remembered as a second bout of hubris,” said David Butter, regional director for Middle East and North Africa at Economist Intelligence Unit.
The first bout was in November 2008, two months after the collapse of Lehman Bros, when Dubai spent $24-million on the opening ceremony of the Atlantis Hotel, an event that did more to highlight a taste for extravagance than assuage fears that the economic crisis was not being taken seriously.
Emaar says property prices have now stabilised, confounding wider expectations for stress in the sector.
“You have to ask, ‘Why we are building all this?’. To bring quality of life and a smile to people—and I think we should continue to do that,” said Mohamed Alabbar, chairperson of Emaar, the Arab world’s largest listed developer.
“Crises come and go,” Alabbar told reporters.
“We build for years to come ... We must have hope and optimism.”
But investors took little heart, with Emaar shares closing down 3,4%, pulling Dubai’s broader index 2,6% lower.
“This is the culmination of Dubai’s momentum, and not just Emaar’s,” said Saud Masud, UBS head of research. “It is probably the end of Dubai mega projects for the next several years as the emirate tries to rationalise its resources and looks to build the economy again in some way or another.”
Paying down debt
In a sign that Dubai is trying to meet its obligations, DP World, a subsidiary of state-owned holding company Dubai World, said on Monday it had paid obligations on time tied to a sukuk, a sharia-compliant financial instrument, and a bond issue.
Dubai sent shockwaves through global markets on November 25 when it said it would request a standstill on billions of dollars of debts linked to the state-held holding firm Dubai World and its property units Limitless and Nakheel, developer of three palm-shaped islands.
Dubai World is expected to pitch a formal standstill proposal on its debt payments to creditors this month, while it comes up with a restructuring plan.
The conglomerate has already moved to ringfence its profitable assets, and said its debt restructuring excludes firms on a “stable financial footing” such as DP World, Istithmar World, and Jebel Ali Freezone.
The tower’s opening has been delayed twice and, unlike other projects, survived cancellations after the crisis hit the one-booming city.
Experts say land scarcity or urban density does not justify the height of the building. Rather, its monumental nature is a symbol of Dubai’s ambitions.
From the 124th-floor observation deck, viewers can see 80km on a clear day. The air is noticeably cooler and fresher on the terraces than in the stifling ground-level heat and humidity of Dubai’s summer.
Terraces are located at setbacks spiralling up the tapered tower, which is based on the “geometries of the desert flower and the patterning systems embodied in Islamic architecture”, according to its promotional literature. - Reuters