Dubai World’s dream is a $3.5 billion debt nightmare

Dubai World’s dream is a $3.5 billion debt nightmare

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Dubai the brand stands for opulence and a luxurious lifestyle in a modern and vibrant 21st century city that has risen from the desert sands in just a few years.

The Dubai dream has turned in to a nightmare as an economy built on tourism; property and financial services took the full force of the recession hurricane head on.

State-owned Dubai World was one of the powerhouses driving the emirate’s economy, but now the company’s reputation lies in tatters as the firm has pulled out of projects, sacked thousands of staff and struggles to repay $3.5 billion debt by the end of the year.

Dubai World has the debt wrapped in subsidiary Nakheel, a construction company specialising in the luxury apartment blocks. Nakheel also built the artificial islands in the shape of palm trees and a map of the world off Dubai’s coast.

As property prices slumped by 50% and the buyers stopped coming, Nakheel financial problems have forced Dubai World to restructure and as such an integral part of Dubai’s economy, the knock on effects in the desert state are enormous.

“Dubai World has put on hold a number of projects until the market improves, including some tourism projects in Africa and elsewhere,” the company said. Details of the cancelled projects were not forthcoming.

Dubai World chairman Sultan Ahmed by Sulayem seems to have also put a planned $1.5 billion investment in African tourism on hold.

Dubai World had a shopping list of tourism projects in South Africa, Zimbabwe, Mozambique, Senegal and Rwanda.

Only in May, the Sultan had extolled the African adventure and pointed out the continent was underdeveloped for tourism Dubai style.

In a desperate bid to generate cash, the company is considering moving the cruise liner Queen Elizabeth II from Dubai to Cape Town to act as a floating hotel during next year’s World Cup.

Dubai World bought the ship for about $100 million in 2007.

The plan hinges on the condition of the liner, which has been docked at Dubai and needs a certificate of seaworthiness to sail to Cape Town. At the time of purchase, the ship was in line for refurbishment but little or no work has been completed.

The company’s Nakheel Leisure Division is planning to host a visit from golf’s European PGA tour on the promise of offering a record-braking $20 million dollar prize purse – but that is also subject to a cut of 25%.

“Perhaps marketing the tour as the world’s richest is not appropriate at the present time,” said a source in Nakheel.

Building the clubhouse designated as the “preferred operational base” for the tournament is also behind schedule.

“Due to the timelines involved a decision has been taken to construct a temporary structure that is fitting of the season-ending championship and will provide the necessary facilities,” the company said.

No reason was given for the delay or for the reduction in prize money.