Dubai in $250b slump

Firms operating in Dubai face payment delays, contract renegotiations and unfair calling of performance bonds now that the emirate’s construction boom has ended, according to EFIC’s World Risk Developments July newsletter.

EXPORT Finance and Insurance Corporation (EFIC) senior economist Dougal Crawford, says while $11.9 billion in financial support from Abu Dhabi has lowered the risk of default, it will not be enough to stop projects being cancelled, delayed and scaled back.

“Up to US$299 billion worth of projects could be cancelled or postponed,” he says.

As for payment delays, Crawford notes some contractors and consultants have reportedly not been paid for up to six months and the large property developers owe billions. Overall, Dubai’s economy could slump by 10 per cent this year.

The contrast with nearby Qatar is stark. Its economy is forecast to grow by 18 per cent in 2009, thanks to a boom in gas investment and production. $108 billion of gas investments are on the drawing boards in the period through to 2012 and gas production is set to double over the next two years.

By and large, resource-based economies are weathering the world financial and economic crisis better than economies which over-borrowed during the boom years. And this is despite the sharp slump in commodity prices from October 2008 to March 2009.

“While neither Dubai, nor Qatar, nor the Congo are major trading partners of Australia, they all do matter increasingly to corporate Australia, especially as its resource and engineering companies expand into the Gulf and Africa to take advantage of the infrastructure and resource opportunities on offer there,” says EFIC chief economist Roger Donnelly.

It follows news that property industry high-flyers, including the senior agent of a company (Sunland) part-owned by James Packer, are among 13 Australians under arrest in Dubai.

Legal sources in Dubai have confirmed that among those in jail or in effect under house arrest over property-related bribery allegations are:

• David Brown, architect and the Middle Eastern head of the Sunland Group.
Brown has been interrogated at
least eight times and has had his
passport confiscated in relation to a
bribery investigation.

• Marcus Lee, until recently a senior
executive with the Dubai Government-
controlled Nakheel development
company. He is a former executive
with the local property company
Jones Lang LaSalle. Lee is in jail,
without charge and is facing
investigation over alleged bribery.

• Lee’s Nakheel colleague Matthew
Joyce, former managing director of the Dubai Waterfront project, is also in
jail without charge over alleged
bribery.