Dubai - It Had To Happen?

Released: 27 Nov 2009

A replay of the late 1990s?  It is hard to believe but isn't it strange how history has a habit of repeating itself?

When I read about the debt problems in Dubai it occurred to me that I had heard it all before.  Last time it was called the Asian Crisis.

It was just over ten years ago.  I remember sitting through a rather boring meeting with a colleague who had just come back from a conference (or to be more correct it was probably a junket) in Kuala Lumpur.  Filled with the enthusiasm gained from many days of conferencing, he raved on about cranes on the skyline. 

"Why in KL, I counted 97 cranes and when I came back to Australia I saw hardly any".  

This of course was just before the Asian property bubble went pop and plunged the region into recession.  Kuala Lumpur, along with other Asian cities, was left with lots of half finished buildings and holes in the ground.

While it has been exciting reading about the wonderful projects in Dubai, the before and after pictures of  the downtown area, the story about the guy who lives in his crane because it takes too long for him to come down to go home at night, no one has really explained to me why all this development needed to happen in such a short time.  

In 2006, it was reported that there were 30,000 construction cranes working in Dubai.  That was 24% of all the construction cranes in the world.  There were web sites devoted to Dubai's cranes and even video clips of cranes collapsing.

So, what's the fascination with cranes? 

Politicians love them.  They are visible, a sure sign to the punters that things are happening.  Progress, development, jobs, prosperity.  The problem is that this mindset can lead to a "mine is bigger than your's" mentality, the idea that all you need to do is build it and demand will follow. 

In this environment, construction itself becomes the major industry rather than industry that merely provides infrastructure for others.  Hence the current hiccup.

Dubai will come back and continue towards its goal of becoming the Singapore of the Gulf region.  There will be the usual posturing and bargaining.  The vultures will descend looking for underpriced assets.  Eventually, the neighbors will come to the rescue and life will go on.