Dubai, Middle East and the transfer of wealth

In this age of globalization, there are thousand and one ways you could make money. And, thousand and two ways you could lose control of your money. This holds true for every level of the society, the only factors differeniating among the various levels are the size of the effect and pace of change. Of-course, the asian crisis is the biggest and most drastic example in recent memory, I dont know of any such events that might have happened in mid 18 or 19 centruy western europe or america.

I can presently think of two instances where rapid run-off of money happened suddenly. One was in india, last week where an estimated 1.5 Billion US$ left the country, almost all of it was FDI. This was mainly triggered by the fall of indian currency vs the dollar. The corporates were making sure that get the max value for the exchange, and booked their profits couple of weeks ago. The rupee was under pressure mainly due to the high cost of oil prices. Ofcourse, this sudden outflow of money came from the profit taking of stocks, leading to some of the highest drops of SENSEX in recent history. I dont know today's numbers, but i am sure the market will recover surely and most of the fall was an over-due correction in the markets.

The Second example is a slightly more longer term effect, although triggered by sudden events. Here the money left the markets for good, atleast for a long long time. The Event was ofcourse, the sept 9. 11. 2001 event of the twin towers and the money in question is of arab investors in united states and europe. Over the next two years, although most of it almost immediately, money moved gradually back to middle-east from vairous markets. And it is believed, a large chunk of it moved to fund real estate developement, mainly in the Dubai.

Which is where i am right now. In this city, there seems to be huge construction boom. Almost every day, a new 40-something storey building is being built or atleast annonced and every fortnight, a multi-billion dollar construction project being announced. By the end of the decade, these guys will not have any more space to build anything more!! Ofcourse, they have already encountered that problem in certain aspects like the limited beach property available in the city. So they are making three palm shaped land recumation projects (or islands as they call them) and one set of islands ( 300 of them in fact ) shaped like the globe. In addition to these, the city-state is in the process of building the world-biggest tower and mall.

It is not as if the city has no previous property notewhile. Home of the only seven star hotel in the world, and many more attactions, these guys are invested in crazy and crazier projects than you and I could imagine. Like building a 40 ft ski slope in the middle of the desert for skiing purposes.

Infact, it is as if people in this part of the world need not go to any other part of the world at all. All they need to do is to come to dubai for the seven wonders of the world, ski to their heart content, enjoy all the pleasures that any western destination would offer and some more. By the way, did i mention that Dubai is building dubailand, a theme-city which includes a water-park, rides and even a formula one race track. I cant possibly list all the projects out being constucted. Google Dubai Holding for the list of some ofthe projects.

Ofcourse, the process is not without problems. Dubai International financial Exchange, which was recently inarguated, was termed lacklaster in many ways. Most of the projects are not completly vaiable. The cost of living has increased treumenously and higher construction costs are effecting all the projects. The main appoach of the citizens of Dubai is, " We will build them, they will come". They, in this context refers to arabs, muslims, and africans of middle-east and african region, who would prefer to go somewhere nearer to their home and meet people who share similar cultures. However, it is far from proven that they will come. And only time will tell...