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High-Rolling Dubai Economy Comes Down To Earth

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High-Rolling Dubai Economy Comes Down To Earth

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High-Rolling Dubai Economy Comes Down To Earth

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MICHELE NORRIS, Host:

Consumer and investor confidence are dropping worldwide; that's even true in the oil-rich Persian Gulf and even in the Emirate of Dubai, where growth had been relentless in recent years. Now, layoffs are mounting and unemployed foreign workers are fleeing to escape their debts. The government is struggling to contain the growing anxiety.

NPR's Peter Kenyon reports now from Dubai.

PETER KENYON: For the past several years, investors, workers and consumers treated the Dubai economy like a roller coaster that only goes up. Then last fall, they suddenly found themselves looking over the edge. It was a view some foreign workers didn't stick around to contemplate.

(SOUNDBITE OF MOTOR VEHICLES)

KENYON: If you're looking for a scene that reflects the uncertainty and anxiety behind Dubai's image of bottomless abundance, you might start right here at the airport parking lot. Such is the government's concern about plummeting confidence levels that when The Times of London reported that some 3,000 partly paid-off cars had been abandoned here by suddenly unemployed expats, the police chief was called on to issue a vehement denial. He did, saying only 11 cars were abandoned here. Banks, car companies and airport security workers say the number is much higher.

(SOUNDBITE OF AUCTION, FOREIGN LANGUAGE SPOKEN)

KENYON: More evidence that debt payments aren't being met can be found on the industrial fringes of the city. Many of the vehicles going under the hammer in this massive auction are modest, working-class sedans and light pickup trucks, being sold by banks after their owners couldn't make payment on their loans.

Local law says foreigners unemployed for more than one month lose their residency status, and loan defaulters can face prison.

(SOUNDBITE OF AUCTION, FOREIGN LANGUAGE SPOKEN)

KENYON: Just around the corner, the other end of the Dubai auto market: a luxury used-car showroom where a silver Bentley with a burgundy convertible top nestles next to an Aston Martin DB9. The young Bangladeshi men who polish the gleaming hoods say there seems to be a good business these days, buying back trophy cars from white-collar workers with cash-flow problems.

Richard Thompson, editor of the Middle East Economic Digest, says at the root of it all is the collapse of confidence in the Dubai real estate market, coupled with banks that are afraid to lend money.

RICHARD THOMPSON: People are uncertain about their futures. They've stopped going to get mortgages. Even when they do want mortgages the banks aren't lending anyway, so people aren't putting down payments on properties. This means developers aren't getting cash upfront. They can't then pay their contractors, and that is filtering all the way down to the site workers who aren't being paid.

KENYON: Economist Eckart Woertz at the Gulf Research Center says real estate has been crazy with condos being flipped like stocks. He says in terms of fleeing workers, the next time to pay attention will be the end of the school year.

ECKART WOERTZ: And if it's white-collar employees leaving, that, of course, really hurts the economy because these are the people who have spent on luxury apartments, on restaurants, on entertainment and so on. Basically, people did not really save a lot over here in Dubai.

KENYON: Perhaps not surprisingly, Dubai's neighbors in the oil-rich, more conservative capital of the United Arab Emirates, Abu Dhabi, have a certain we- told-you-so attitude now. Analysts say talks are almost certainly going on behind closed doors about a bailout for Dubai.

Woertz says there are signs that the cost to Dubai may be handing over some companies to Abu Dhabi.

WOERTZ: But it seems that Abu Dhabi will probably help Dubai, but probably also at a price. Of course, they want to have control of assets if they give away money, and they won't bail out all projects.

KENYON: Still, Dubai keeps up appearances. Some cities have heritage or cultural festivals. Here, they celebrate the six-week Dubai Shopping Festival. But this year, the designer goods aren't flying off the boutique shelves, and the Muzak seems tinged with melancholy.

The Chinese State Circus is performing here this month, but locals say the circus, that is Dubai, is now down to two rings at best.

Peter Kenyon, NPR News, Dubai.

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