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Overhyped Products: Dubai


They built it and the people came. And then they left.

Once upon a time, Dubai existed as a vast desert of nothingness, inhabited by Bedouins and pearl divers.

But then they built it, and they came. And then they left.

After the first Persian Gulf War, Dubai, which is located in the Persian Gulf and is part of the United Arab Emirates, set out to become the financial center of the Middle East. It built luxury hotels, beautiful homes, and sleek office towers. Its population more than doubled in the past ten years as the newly developed coastal town attracted developers and financiers from around the world. As the London Independent pointed out, Dubai "fast-forwarded from the eighteenth century to the twenty-first in a single generation."

Just three years ago, Nasser Saidi, a former Lebanese minister and the chief economist of the Dubai International Financial Center, told the Washington Post, "We're seeing the beginning of an Arab renaissance, and I find it very hopeful."

That renaissance has now ground to a virtual standstill, thanks to the same negative economic circumstances that have dragged down just about every other economy. Foreigners are no longer swept up by the glitzy promise of Dubai. An estimated 1,500 visas are being canceled each day in the city, and the total population is expected to decline by 8% this year by some estimates.

Rochdi Younsi, head of Middle East research at New York City's Eurasia Group, told Bloomberg News that Istithmar World, Dubai's sovereign wealth fund, "is in serious trouble" and that it "wouldn't be a surprise if the firm just disappeared."

Weakness in Dubai's financial sector led to thousands of layoffs, which led to thousands of mortgage and loan defaults. However, unlike the United States, defaulting in the Emirates is a crime, almost always leading to prison time.

It's no wonder, then, that the suddenly unemployed tend to flee the country. According to numerous published reports, approximately 3,000 cars that once belonged to foreign residents are now sitting abandoned at Dubai's airport gathering dust, the Pompeii-like remnants of lives interrupted.

Dubai could be the last place one might have expected would ever suffer a financial setback, much less an estimated 60% slump in real estate prices and a 25% in luxury spending. Dubai, after all, is the land of the white-gold McLaren Mercedes SLR 722 S. Yes, you read that correctly -- the car is made out of gold. With a curb weight of 3,898 pounds (and subtracting a generous 1,000 pounds for mechanical components), and gold now selling for almost $1,000 per ounce, the car's chassis alone is worth an absurd $2,898,000.

And with what does the man behind the wheel of such an automobile pay for his gasoline?

Why, the Dubai First Bank Royale MasterCard, of course -- the world's first credit card actually embedded with diamond studs.

Not all developers are letting the economic malaise stop their luxurious fun. The soon-to-open Palazzo Versace hotel managed to construct a refrigerated beach with cooling pipes just beneath the surface so guests wouldn't be uncomfortable walking across the hot sand from their towels to the water.
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