Is Dubai witnessing a return to irrational exuberance?

Posted on May 10, 2012

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An artist’s impression of the Discus, an underwater hotel planned off the coast of Dubai by Drydocks World. (Image courtesy: Drydocks World)

Drydocks World, the shipbuilding arm of once-debt-riddled Dubai World, says it is all set to open newer horizons in the tourism and hospitality sector by developing underwater hotels and floating cities.

Amazingly, Drydocks World believes it can steer its expertise in repair, maintenance and conversion services for ships and boats into the largely uncharted waters of marine tourism and hotel development.

Just a few days after Drydocks World’s announcement came news that a revised version of Dubai’s 2015 strategic plan has scrapped goals of 11% growth in gross domestic product, according to Mohamed Lahouel, chief economist of the Dubai Department of Economic Development. The department hasn’t revealed its new growth projections. The new plan has been sent to Dubai’s Executive Council and is expected to be completed by the end of June.

Is there a disconnect here? Or is Dubai playing to its strengths as a regional hub for tourism, trade, transportation and logistics? Those who have been in the region long enough may remember the Hydropolis hotel that was being proposed off the coast of Dubai at a cost of USD 300 million at the height of the real estate frenzy in the mid-2000s. The project never went past the drawing-board stage.

The emirate’s original exuberant growth strategy was based on a reliance on real estate, including what the Wall Street Journal calls “outlandish development projects” such as multiple palm-tree-shaped artificial archipelagoes. The global financial crisis took its toll on Dubai’s once-vibrant property market. GDP declined 4% in 2009 and 2.2% in 2010, followed by modest growth last year and this year, according to data from the Institute of International Finance.

Most of the growth between 2003 and 2008 was driven by the boom in construction, but things have changed. The IIF expects Dubai to grow by 2.5% this year, a slowdown from 2011’s estimated 3.2% rate.

The question is: where do underwater hotels and floating cities fit into this scenario?

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Posted in: Economy, Projects