How one of the world's wealthiest cities went from super-boom to bust
Abu Dhabi / Reuters
There were once great things planned for Saadiyat Island, a sandy atoll located just off the coast of Abu Dhabi, the capital of the oil-rich nation of the United Arab Emirates.
Frank Gehry, the famed American architect, was chosen to design a sweeping, sinuous building that would house a branch of the Guggenheim Museum. A state-owned development company signed deals to open a satellite branch of France's Louvre and to build a sprawling, falcon-shaped complex that would serve as the UAE's first national museum.
UAE officials envisioned the museums as the cultural centerpieces of a $27 billion tourist destination incorporating restaurants, high-end condos, and luxury resorts.
Five years later, work crews have yet to break ground on any of the museums, and the UAE's state-owned Tourism and Development Co. announced late last year that it was indefinitely suspending the Louvre and Guggenheim projects. On a recent visit, small boys could be seen playing soccer on the flat area of the island's coast that had been earmarked for the two Western museums.
"The Abu Dhabi building we've been working on in the last five to six years has been stopped, and that's painful," Gehry told Bloomberg News last winter.
Saadiyat is Arabic for "happiness," but the island's travails illustrate a broader, and decidedly unhappy, emerging trend. Abu Dhabi is the wealthiest city in one of the wealthiest countries, and it had long seemed immune to the global financial crisis ravaging Europe and the United States. But the city's economy is finally showing clear signs of deterioration, prompting the first budget cuts in years and threatening the future of Saadiyat and other ambitious projects.
As in so much else of the world, the main culprit is the real-estate sector. Private and state-owned developers built scores of skyscrapers, office buildings, apartment complexes, and gated communities over the past five years, banking on an expectation that Abu Dhabi's population would spike as expatriate business people flooded the city because of its oil, lack of taxes, and safety.
But the economic slowdown in Europe and the U.S. dramatically reduced both the numbers of corporations choosing to expand into the UAE and the numbers of tourists able to afford the high price of vacationing here. That, in turn, has led to a glut of empty buildings and hotel rooms, decimating the city's tourism and real estate markets and dragging down its broader economy.
"The economy of Abu Dhabi is unsustainable," said Nasser bin Ghaith, a British-trained economist in neighboring Dubai. "Every major project in Abu Dhabi begins with petrodollars spent by the government, but at some point these companies have to stand on their own, and they haven't been able to do so."