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Sunday TelegraphIn transforming a forbidding desert into a vibrant city of skyscrapers, Dubai has bagged several world records: the highest building; the biggest man-made islands, the Palm Jumeirah and the World islands; the biggest shopping mall, the Dubai Mall; the biggest indoor ski area, Ski Dubai; and the greatest number of seven-star hotels. There are more records in the pipeline - the even bigger Universe islands, the 1km-high Nakheel Tower and the QE2, the ocean liner that arrived last week to become a luxury hotel.
All questions about how this growth is being financed have been brushed aside. While the West has suffered, Dubai's extravagance has reached new levels: from its vast Terminal 3 at the international airport, which is due to be redundant when the even bigger Jabel Ali airport is built in 2015, to the $20m launch party of the Atlantis hotel two weeks ago.
But in recent weeks the cracks in Dubai's economy have become undeniable. Property prices have slumped, demand has dried up and, for the first time, the emirate is being forced to consider calling a halt to its expansion. Some analysts are claiming that Dubai could implode, weighed down under a pile of debt and, given that it has relatively small oil reserves, no obvious way of paying for it. One said: "This has been the most spectacular spending mission on Earth. But it's a mirage. If complex debt structures have brought the financial world to its knees, Dubai is the world's biggest toxic timebomb."
The possibility is absorbing Western firms. The Middle East, floating on a magic carpet of vast oil and gas reserves, was supposed to be the oasis in the global financial chaos. The hopes of the financial system, most obviously the banks, have been pinned on securing cash injections from the Middle East, while hundreds of thousands of City workers are looking to the region for new jobs. If Dubai can't pay its debts, much of which is owed to international banks, the emirate could turn from potential saviour to yet another big problem.
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http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3536012/Dubai-vows-to-keep-building-despite-global-crisis.html