Dubai, the fastest growing city in the world

Tune into a business TV channel anywhere in the world, and before long you will be hearing about the exploits of Dubai and its dash for growth in the midst of the current oil boom. Indeed, the eyes of the world are now on Dubai.

From the air the projects are all visible. From the $4.2 billion new airport terminal to the nearby Dubai Festival City and the new bridge across the Creek; then towards Sheikh Zayed Road and the towers surrounding the Burj Dubai, which will be the tallest tower in the world; then up to New Dubai where 84 towers are under construction around the Dubai Marina, and the Palm, Jumeirah which has risen from the sea connected by a maze of new roads.

Offshore the third Palm Deira is now starting to show from the sea-floor, and will be ten-times bigger than the Palm Jumeirah. Then there is also The World, a map of the world made up of Maldives-style islands, four kilometers of the coast; and the Palm, Jebel Ali, is nearing completion. Some 300 hotels are under construction in Dubai at present.

Free zone city

Economic infrastructure is being built to match: from the Dubai International Financial Centre and Dubai Metals and Commodities Centre, to the massive extension to the Jebel Ali Free Zone and the Dubai Logistics City complete with a huge new airport; plus a whole host of additional free zones, including the Dubai Internet City, Dubai Media City and Dubai Healthcare City.

The simultaneous construction of projects valued well in excess of $50 billion is putting considerable stain on local capacity but open labor laws and a free market economy greatly assist the ability to engage international capacity both for contractors and materials.

However, the signs of an overheating economy are clear: traffic grinds to a halt during rush hour, and local inflation is at least 20% and possibly higher, led by soaring rental costs. The labor market is also very tight, despite the daily arrival of new expatriates to fill burgeoning demand.

Can it last?

On the other hand, there is no sign of the money running out for new projects. Quite the contrary, new projects continue to be announced on a regular basis. Foreign investors, principally from Saudi Arabia and Kuwait, continue to flock to Dubai, and local investment from Abu Dhabi remains strong.

At some point things have to start to slowdown. And aside from inflation and traffic, there are two other warning signals: the sale of off-plan property in high-rise towers is almost at a standstill after rampant speculation; and the UAE stock market is almost 10% of its recent peak.

For no boom lasts forever and what goes up must come down. However, most commentators are optimistic that with oil fuelled liquidity at a record high in the region, Dubai's economy will have a soft landing, and whatever happens the infrastructure that the boom will leave behind will last for generations.