One of my favourite pet hates is the breathless enthusiasm expressed by people when speaking about Dubai. They tend to promote the place with a Messianic zeal of new converts. I might not be PHD in economics but something smells rotten in the kingdom and it's not the stale hummus.

Does the emperor have no clothes? Is Dubai some sort of an economic cult?

A Ponzi scheme is an investment pyramid where the returns on investment of previous investors are re-payed with the investments of the subsequent ones.

Each year, more and more projects are started in Dubai that bring ever more expats... who work on even more projects that need even more expats who live/use the previous projects. Sounds sustainable?

Dubai's idea was to create a huge playground for the rich from all over the world. To attract such numbers of very discerning individuals, they built...

A. Largest indoor shopping mall.
B.Largest indoor skiing slope.
C. Tallest skyscraper.
D. The biggest luxury hotel in the world.

Now I understand how D might interest the said rich individuals (even though most rich people prefer anonimity and relative solitude, hence the the more expensive the room, the smaller their number.)

But the first 3? Why would you go to a cheesy indoor slope... when you own a chalet in Gstaad?
Why go to a gigantic American type mall... when you go shopping to Milan in Spring and Paris in Autumn... all in exclusive boutiques.

Tall skyscrapers? How long will you stand around and stare at one?

Dubai also has the distinction of being WAY too hot in Summer (requiring you to stay indoors, don't believe me? Check the drop in prices in Summer) and water too cold in Winter... which is a problem for a VACATION destination.

The main beach in Dubai has also been recently overflowing with faecal matter... unless swimming among some Arab t£^&ds is what you enjoy I see that driving people away.

Not to mention that islamic mores, while more relaxed then in Saudi Arabia... might dampen some of the parties that the rich like to throw.

Economically Dubai is close to most of the Arab oil producing nations... and Persian one across only 50kms of water, a nuclear program and an itchy trigger finger.



So... what am I getting wrong here?

Well, intersting thread, however not to see the things in black and white:

Dubai which unlike Abu Dhabi hardly has any oil, whitin 2-3 decades has made a lot out of sands. Just check amount of tourists, visitors, businessmen,... in last a few years and compare it to almost zero some years ago.
I admit there has been exagerration, and overvaluation in some prospects of city developments (like dreamful building projects without being sure of it's feasibility and profitability), but this shouldn't question the whole issue.

Last couple of months, have seen global financial tsunami hitting there and many projects are halted,... so I believe this will cause the rulers there, to be more realistic and stick to facts and develop the city accordingly.

I think you have stumbled on something there Dude. And something similar is of course also taking place closer to home, i.e. along the Spanish coast lines.

Over the last 20 years or so I have regularly visited Dubai for business. In that time it has evolved enormously. In my opinion, it's a bubble that will burst, there was a massive stock market "correction" around a year ago where the Stock Exchange fell around 60%. Some people lost everything. There are some dodgy rules regarding property ownership ability for non nationals and the property market is overheated with many new places not sold.

It's a fantasy Disneyland

Anybody read Jule Verne's
http://en.wikipedia.org/wiki/Propeller_Island

It's about an artificial floating city on a ship called Milliard City where only the very wealthy live.

Don't forget the airport. They are trying to position it as a hub to Africa and Asia, so many airlines could bypass Europe.

It seems to me to be a bit like Switzerland in the Middle East; business friendly (taxes), banking center and a hub for travel. The ME needs a place like this to act as a buffer to many of the less moderate states.

So not sure that I would characterize it as a Ponzi scheme. Overheated...probably. Ready for a crash...possibly. Many worse places to invest, though.

fduvall

You're not getting anything wrong. You just haven't bought into all the hype like so many mindless dittoheads.

I visited Dubai frequently during the '80s when I lived in the Middle East. It was a great business location and was considered one of the more progressive places in the region at the time. I enjoyed the beaches and I remember going ice skating once in an indoor ice rink they had right next to the Hyatt.

I haven't been in over 20 years, but between the stories I've heard from those who have and the articles in the news, I have no desire to revisit. It sounds like they've gone totally crazy and all out tacky. Like Las Vegas on steriods.

But all the luxury, glitz and glamour cannot change the fact that there are huge divisions and disparities between the locals and the expats, between expats from, say, Europe or the US and those from South Asian and East Asian countries (this also includes the area of remuneration), there is one one set of rules for the locals (with a subset of rules for wealthy locals and another for poor locals) and another for the expats, and being, still, a fairly conservative Islamic society, I would imagine Sharia laws apply, especially as they may pertain to women. I have also read that the local law enforcement refuses to prosecute crimes committed by locals against expats and that's a big sore point.

I also believe that Dubai's high profile, economic success (whether dubious or not) and it's efforts to appeal to Westerners and the über rich make it a potential target for a terrorist attack.

Sorry, but it'll take more than sheer wealth and glitz to give me incentive.

Exactly. I look at someone like Qatar and see a much more sustainable version of Dubai... albeit with some issues. Nothing like UAE though.

Yes and no. The new "currency" being invested is also the people. People want to make money in Dubai, so they come buy an appartment there, a car, live their life their, which in turn feeds the speculation, the second the inflow of people and money stops... there is a problem. Nobody lives in Dubai to simply live there, everybody is temporary. Again 800,000 locals and 3 mil expats. If the foreigners leave... disaster.

Well, it seems like CNN shares your gloomy view. They just aired a show about the situation in Dubai and their view was basically the same as your.

Except that they have to be pretty polite about it... least they lose some of their sponsors.

Like anywhere on earth, every place has advantages and disadvantages over other places.
I try to summarize the good and bad things about Dubai:
Plus:
Tax free
Relatively Nice beaches
Regional financial hub
Good travel hub, and numerous flights to all continents
Good tourist facilities and shopping
Lotsa expats living there due to intern. entities there
Massive amounts of liquidity
UAE Oil
Noticeable nightlife
Not freezing your tits off so much, good weather 8 monts of the year(I swam there outdoor in Jan.)
Peacefull and Crime free (relatively)
Whitin 5-6 hr. flight to Europe, middle east, and south Asia

Negative side:
Not so much of elections and people's vote
Rules and laws not quite mature (but it is improving)
Too hot 4 months of the year
Public services are weak (however it is improving quickly)
Not so green
Overpriced (probably will go down a little bit)

...and virtual slave labour.

Bahrain is my playground

If you mean construction workers from Pakis. Ind.,... , well they are not paid that well, but don't forget that in their own homeland they may not have bread to eat and unlike slaves they are not forcefully taken there. This is a sad fact of life in that region, and a part of todays world and life.
Whether we agree on it or not doesn't change the fact.

While I don't like the look of Dubai a a place to visit, and it does seem due a bust, not sure that this is a Ponzi scheme. These are real assets being built, albeit on the crest of a massive property speculation (anyone buying now?). When you say it's like Las Vegas on steroids... sums up what I can tell, I'm sure people wrinkled their noses at it when it started, but Las Vegas is still there and growing. And I don't fancy visiting there either.

Once everyone calms from the current mess down we my end up with a fairly liberal gulf state, which can only be good.

Or not. Feel free to shoot me down.

There are several examples of Ponzi schemes with "real" assets in the bottom. The Stamp scheme in Spain e.g. Or a bit closer to home, Tupperware, Herbalife and what have you.

Dubai appears to be a bubble. Hard to tell.

But Dubai is definitely built on sand. And if global warming does cause serious ice melts, then all those fancy artificial islands would be under water. That would be poetic justice, considering that petroleum is a major contributor to global warming.

Meanwhile the Maldives are preparing to abandon their natural islands. They are exploring buying land in Sri Lanka, India, Malaysia, etc.

I regularly transit through Dubai. But investing there is not a rock solid proposition.

http://business.timesonline.co.uk/to...cle5663618.ece

Be careful that Amway doesn't see you comparing them to a Ponzi scheme. Their lawyers are second only to the Scientologists for going after people...



fduvall

Well I don't think there's a scam going on though. A grossly inflated, ill thought out, crassly designed, bursting bubble, but not a scam.

Are the UK/US housing markets a Ponzi scheme?