DUBAI, United Arab Emirates – The state-owned conglomerate Dubai World said Wednesday it is putting multiple projects in Africa and elsewhere on hold because of the global economic downturn.
The pullback comes as Dubai World scrambles to pay back billions of dollars in debt racked up during the boom years, even as it weighs plans to relocate its prized Queen Elizabeth 2 luxury liner to Africa to generate revenue.
“Dubai World has put on hold a number of projects until the market improves, including some tourism projects in Africa and elsewhere,” the company said in a brief statement. It did not specify the projects to be shelved.
Dubai World has previously pledged to invest $1.5 billion in Africa over a five year period. Chairman Sultan Ahmed bin Sulayem has repeatedly described the continent as a largely untapped investment opportunity.
The company joined a British investor in acquiring the historic Victoria & Alfred Waterfront property development in Cape Town, South Africa, for $1 billion in 2006. That site became home for a new division, Dubai World Africa, which was charged with developing investment projects on the continent.
Among the plans that have been announced are a $200-million golf and beach resort in Mozambique, a 5-star island beach hotel in Senegal and $230 million worth of tourism facilities in Rwanda.
Dubai World’s retrenchment comes amid an unprecedented cost-cutting drive within the company, which has interests in real estate, port operations, tourism and financial services.
Various subsidiaries have slashed jobs and combined operations to streamline the conglomerate, which accounts for a large portion of the city-state’s economy.
The task has been made more difficult by a severe real estate slump that has dried up demand for the high-end housing the company’s large Nakheel property unit specializes in. The division is best known for building artificial islands in the shape of palm trees and a map of the world off Dubai’s coast.
Real estate consultancy Colliers International this week said its index of Dubai housing prices has plummeted by half since its peak less than a year ago.
Dubai World’s most pressing concern is a $3.5 billion pile of Nakheel debt that must be paid back this year.
“Their near-term priority is to somehow work through that,” said Bobby Sarkar, a real estate analyst at Al Mal Capital in Dubai. He said he wouldn’t be surprised if Dubai World pushed back additional projects as it tries to shore up its balance sheet.
One idea under consideration is to move the QE2 from Dubai to Cape Town, where it could generate cash by serving as a floating hotel amid the anticipated surge in tourism from next year’s World Cup.
Dubai World paid about $100 million for the storied cruise ship in 2007.
The company originally planned to undertake a costly refurbishment of the vessel and turn it into a stationary hotel in Dubai, but little if any work has been carried out.
Nakheel said in a statement plans to move the ship to Cape Town are awaiting approval by South African authorities and “have not yet been finalized.” The vessel is undergoing inspections at Dubai’s Port Rashid “to ensure her certification is in place and up to date should she need to sail down to South Africa,” the company said.
Separately, golf’s PGA European Tour said its head plans to visit the region in the “very near future” amid reports Dubai World’s Nakheel Leisure division is planning to cut the $20 million prize package for the tour-ending Dubai World Championship.
A person in Dubai’s golf industry with knowledge of the partnership who spoke on condition of anonymity said the prize package was expected to be reduced by 25 percent.
“Perhaps marketing the tour as the world’s richest is not appropriate at the present time,” said the person, who was not authorized to discuss the matter publicly.
The company deferred questions on the prize to the European Tour. It did say, however, that the clubhouse facility meant to be the “preferred operational base” for the tournament is behind schedule.
“Due to the timelines involved a decision has been taken to construct a temporary structure that is fitting of the season-ending championship and will provide the necessary facilities,” the company said.
No reason was given for the delay.