$3.6bn Dubai Waterfront sell-out a sign of the times

Normally the end of July is a period of almost flat calm in the business life of the Middle East. But 2005 has been a remarkable year. And it was therefore appropriate that the news of July was rounded off with an exceptional event.

The sale of the Madinat Al Arab, the heart of the Dubai Waterfront project next to the Jebel Ali Free Zone on the outskirts of the city, is truly remarkable. This multi-phase project is the Dubai of the future with projected accommodation for 500,000 residents, and the the Al Burj, one of the world's tallest buildings.

It continues the now established record of Dubai in coming up with landmark projects of great imagination. However, this success also shows that investors' appetite for real estate projects is still strong in the emirate despite the huge number of schemes underway.

Indeed, construction projects in Dubai have become the most visible manifestation of the ongoing oil boom. But how long can this last?

The debate is complicated. But Jim Rodgers, the ex-fund manager who once worked with George Soros and whose book 'Hot Commodities' is a best-seller, appeared on Bloomberg TV last week to make a few timely observations.

He argues that commodities have entered a 15-20 year boom, and that global equities are now in a bear market of similar duration to their boom of 1982-2000. His even more significant point is that any correction in commodity prices will now be followed by even higher prices shortly afterwards, and that the commodity boom will continue whatever happens to the real economy.

We have to step back to the world of the 1960-70s to understand what Mr. Rodgers is saying. Then commodities enjoyed a similar bull run. Indeed this 20 year alternating pattern of boom to bust has been noted by economists in the past, notably the great Nicholas Krondatiev, discoverer of the controversial Krondatiev cycles.

What this means for GCC business in practical terms is that the oil boom is here to stay. However, over-investment is therefore almost guaranteed in most business sectors, creating unwelcome competition and a tougher environment for profits.

For within the longer Krondatiev cycles of an economy, smaller business cycles of seven to 10 years will continue with up and down cycles of as little as three years' duration. Nobody ever said business planning was going to be easy, and an environment in which it appears that any fool can win is often the most deceptive.