Dubai has won the race to host the 2020 World Expo but analysts are giving warnings about a repeat of the boom-and-bust cycle that has plagued the tiny emirate.
The success of Dubai’s bid, which beat stiff competition on Wednesday from Yekaterinburg in Russia, Brazil’s Sao Paulo and Izmir in Turkey, marks an impressive economic recovery since the country’s near financial collapse between 2008 and 2010.
Dubai, one of the seven emirates that make up the UAE, becomes the first Middle Eastern city to host the event in its 150-year history.
Hopes for a successful Expo bid have already contributed to speculation in the property market, where prices are up some 20 percent over the past 12 months, and the stock market, where the index has soared 79 percent this year.
“The key challenge policymakers now face isn’t generating growth but managing it, making sure it’s sustainable
and well-balanced,” Simon Williams, chief Middle East economist for HSBC, said.
“Policy decisions over the next 12 months will determine how successful Dubai will be in avoiding a repeat of
the boom-and-bust cycle further down the line.”
In line with Dubai’s reputation for ostentatious glitz, a spectacular firework display erupted around the 2,717ft Burj Khalifa, the world’s tallest building, after the announcement of the bid’s success in Paris on Wednesday night.
Dubai’s political leaders think the event will draw more than 25 million visitors, 70 percent from outside the United Arab Emirates, and create 277,000 jobs – though some analysts believe those numbers may be somewhat optimistic.
“The scepticism is always there – Dubai has been raising questions around the world because we do things so fast,” Giorgio Ungania, a new media analyst, told Al Jazeera’s Stephanie Dekker.
“But have no doubts that the leadership of this country is seeing this as the opportunity to showcase Dubai at its best, and it will not miss this opportunity.”
The huge event, which will see new infrastructure spending estimated at between $7bn and $18bn, comes on the back of several ambitious projects – including the construction of a replica of the Taj Mahal, a residential area with a giant pyramid, and an apartment complex with penthouses worth $250m each.
Dubai lacks the oil wealth and deep fiscal reserves of other rich Gulf states, so government-related entities (GREs) look set to finance much of their Expo work with bank loans.
Heavy borrowing by GREs, whose debts are already worth about 90 percent of Dubai’s gross domestic product, were at the root of the 2009 crisis, London-based Capital Economics noted.
But, for now, Dubai residents continue to celebrate.