Economists eye up the ladies

When times are hard, women shoppers will forgo a big-ticket purchase - $500 slingbacks, say - and opt for small indulgence. Such is the theory put forward in the New York Times, quoting Estée Lauder chairman Leonard Lauder, who noticed a sharp rise in his company's lipstick sales in the months following September 11.

US pundits are now trying to track lipstick sales to see if there are any pointers on consumer confidence. Short skirts are also taken as evidence the economy is doing well; the longer the skirt, the worse the market.

Well it beats looking at investment flows, exchange rates and the price of imported rice.

Abu Dhabi sets sights on worldly reputation

Abu Dhabi wants to create a world class image for itself. A five-year plan unveiled by the Abu Dhabi Municipality includes a smoking ban, clean beaches and better “urban landscaping”. The Municipality also hopes to become more “customer orientated”, with the introduction of “one-stop shops” for municipal services.

Targets are good, as is the willingness to bring sense and structure to a city growing at such a pace. Great cities tend to have a check-list of major attributes – good public transport, low crime, leisure, culture, education, low density living, environment. Abu Dhabi, with the Masdar eco city, art galleries and a new tram system planned, is trying to tick as many boxes as possible.

But great cities also have a vibe, a feeling of tolerance, a sense of community. The Economist Intelligence Unit has once again judged Vancouver as the World’s Most Liveable City (Melbourne was second), and not one Middle East city made the top 10. The judging criteria are a reminder that it is people, not just infrastructure, which makes cities great.

Timeshare: nice idea, tough sell

Timeshare looks to be on its way to the Dubai real estate market. Buyers will be able to take fractional ownership of villas or apartments; in theory this opens up ownership to investors with smaller deposits, or holidaymakers looking to make regular visits to Dubai. Diversifying the real estate market is no bad thing, it brings new money into the market and keeps things spinning along. The market could be worth $1bn by 2010

If there is a hitch it is that, in many markets, timeshare has become a byword for ‘scam’. At the very least timeshare has struggled to prove the best financial investment. It can be a sound long-term, lifestyle investment, but rarely provides investors with stellar returns.

For Dubai real estate, that really would be something original.

The sky is not the limit

Ajman wants to build an airport. And why not? Every other emirate has one, some even have two.

If we are to believe the expansion plans, the UAE’s west coast airports will be handling 230 million passengers a year by 2015. This equates to a packed, 500-capacity A380 superjumbo arriving at one of the six airports every minute, of every hour, of every day.

The figures must be nonsense. London Heathrow, currently the world’s busiest international airport, sees 67m passengers a year. Gatwick, also serving London, sees 37m. The UAE could add Paris (60m) and Frankfurt (54m), and still fall short. This year the UAE six might process 40m passengers.

Or is it nonsense? Emirates has consistently hit its targets and has the biggest order of A380s of any airline. Sharjah is making a sensible pitch for low-cost traffic (a growth sector), Ajman and RAK have modest aims. Abu Dhabi has the money to bully its way into the equation.

As with many things in the go-ahead UAE the figures are outlandish, but just this side of believable. Man made island home to 500,000 people? Sure. Patch of desert home to six world class theme parks? No problem. A 150-storey tower? Make it 170 floors.

The danger is that projects can’t be taken seriously unless they aim for fantastical targets. And, for now, the press and public swallow it. It’s not that some mega-projects can’t work, but it isn’t a given that every one of them will. Greater scrutiny from the off might avoid a bumpy landing.

Cigarette City goes up in smoke

First a ban on smoking in public places, next a hike on the cost of a packet of cigarettes: the UAE is in danger of losing its reputation as a smoker’s paradise.

Just a year ago the idea that smokers would be restricted on where they sparked up, or that they would have to pay more than giveaway prices would have been unthinkable. Now that double whammy is on the cards. A new federal anti-smoking law is expected to be passed at the end of the month, with a public smoking ban in place across the emirates by June.

The National says the average price for a packet of 20 cigarettes is Dh6 (US$1.60). In the UK, it is the equivalent of about Dh42 and in the US, less than Dh20. No word on the UAE price hike; it will be interesting to see how tough the government wants to be. Taking a pack of smokes to Dh20 would only make them cheap, rather than ridiculously cheap. Dh50 would really send a message. But would this add to UAE inflation?

Smoking is accepted to be a ‘bad thing’, but, a hard habit to break, price rises can be seen as less of a deterrent and more of a straight tax on addicts. It will be interesting to hear what the government plans to do with this extra revenue.

'Good' Gulf money flies to the rescue

While regulators threaten to tighten the criteria for sovereign wealth funds investing in European assets, pissing off Gulf funds in the process, private business is doing what it does best: privately going about its business. Business-class airline Silverjet has found a Middle East investor to inject a live-saving $25 million into the loss-making carrier. When creditors come calling, needs must.

European politicians are concerned about Gulf funds’ motives. European businessmen don’t seem to mind, particularly if the money helps an innovative new business through a tricky stage of its development. In a tough airline market, Silverjet, the last-remaining business-only airline following the recent collapses of Eos and Maxjet, flies from London to just two destinations: New York and Dubai. The new money should help it open new routes into India, South Africa and the US, and better its chances of survival.

Time will tell whether Silverjet’s business model works, but it would surely be doomed to failure without the injection of this Gulf money. As European economies slow, and their new business ventures find it harder to secure credit, Gulf funds, willing to back innovation, might come to be seen more favorably.

Dubai arrives at its cultural crossroads

Dubai airport is now the world’s 6th busiest. According to government data, the total population of the emirate in 2007 was more than 1.5 million, and it is expected to grow at a rate of around 7 percent. Out of these, only around 17 percent are Emiratis.

As so many expats settle in the city, and number of business and tourist arrivals continues to rise, is Dubai now trying to assert its cultural status? Internet provider Du recently banned sites which were deemed as “inconsistent with the moral, cultural and social values of the UAE”; Mall of the Emirates now has posters advising shoppers not to “show excessive amounts of flesh” and “should refrain from public displays of affection, like kissing.” Burjuman and Reef Malls plan to follow suit.

Why this sudden tightening? The government must be convinced these new rules won’t put off migrants and tourists (no porn online, and no bikinis in the mall is not such a bad thing), but it does suggest Dubai wants to draw a line on what is acceptable, and what isn’t. It also coincides with louder calls for more jobs for locals. The current rate of unemployment for the UAE nationals is 13 percent.

As the UAE celebrates National Identity Year, the concern is where does this assertion end?

The real estate boom requires a huge number of new arrivals to fill apartments and villas. In 2007, around 2,200 structures were built in Dubai at a cost of $4,000 million, out of which around 1,500 were residential. Besides occupants, these buildings also require builders. It is to be assumed neither the occupants nor the builders will be Emirati. And with bigger and costlier projects being signed almost everyday, it doesn’t seem like real estate is going anywhere but up.

Dubai now seems to be sending out mixed signals. On the one hand, it promises to be the dazzling, global cosmopolitan haven, and on the other, a morally and culturally strong Muslim state. It requires a fine balance.