Dubai is perhaps the world’s top tourist destination. Or at least it was.

In the past 5 months, the media has been up in arms about Dubai’s economy. Indeed, Dubai has taken a significant turn for the worst.  But how bad is it really? Is it the global recession plaguing the world that is causing Dubai’s downfall, or is it something unique to the city itself? What’s really going on in the Emirates?

A notable and extremely important problem, however, is that no one really knows what is going on in the U.A.E. anymore. This is because the government has issued new laws censoring any press coverage that could potentially damage the country’s reputation.

Now, the rumors replacing the hard facts may potentially be painting a picture worse than reality.

Dubai strikes up images of luxury and decadence—the ultimate retreat for the young and affluent. Having partied there myself, I can vouch for the fact that Dubai does indeed offer a display of bars and restaurants to rival those in most any major city from Chicago to London.

The Burj Dubai, to be the tallest building in the world upon completion.

The city also attracts top architects from around the world who use Dubai’s innovative spirit and extravagance as a playground for some of the most creative and daring architecture in the world.  The nearly completed Burj Dubai will soon be the new tallest building in the world. This tower’s truly mythic appearance represents Dubai’s thriving and uniquely international cosmopolitan feel. But is the city still thriving?

Dubai is an icon of the developed world, and is a powerful symbol of wealth and excess. Across the globe, but particularly within the Gulf community, Dubai also represents lavish indulgence and perhaps inappropriate displays of debauchery. Dubai means something to a lot of people, and many journalists have an agenda to pursue. Some want to see it fail; some want to see it succeed.

The new censorship laws have fostered a spirit of confusion and frenzy. Because the government has placed media restrictions on newspapers and journals against publishing anything incriminating, how can we believe the good reports?

Here are some things we do know about Dubai.

In January 2009, before the new laws came out, Dubai newspapers reported that 1,500 work visas were being canceled daily. In fact it is likely that the numbers are actually much higher. Upwards of 10,000 cars have been left in the Dubai international airport parking lot—abandoned by expatriate workers who cannot pay their loans because they have been laid off. If loans for apartments and cars are not paid off, the risk of ending up in debtor’s prison is tangible in today’s Dubai, for wealthy Westerners and poor laborers alike.

Dubai runs on 90-95% foreign labor. The expatriate population is not merely the foundation of Dubai; Western expatriates and low-wage laborers are Dubai. Normally, when the economy in a city goes sour and jobs are lost, unemployment goes up but the population stays the same. Because Dubai lacks any significant Emirati population (needless to say, any Emirati workforce), when jobs are lost, the city loses people.

Therefore, the failing job market in Dubai is causing double trouble, because not only are these laid-off people not spending big bucks, they are not even buying coffee and movie tickets—because they just aren’t there anymore.

Traffic and taxis are another indication of Dubai’s struggle. Today, traffic levels are halved. From December to March, the difference in the city has been drastic. Indian and Pakistani taxi drivers bemoaned the situation, but it was clear even without their words. They reported having no work; that I was the first ride of their day at 3 pm. And the taxis are metered, so there isn’t even a chance of over-charging. Things are very bad, they said.

On my first visit, taxis were as elusive as health food at Christmas, and traffic was atrocious. You had to plead and chase to get to get a ride outside your hotel or the mall. A mere three months later, taxis were lined up, waiting. Just waiting. Outside the malls, the bars, the hotels, they queued hoping to get the rare tourist. The traffic too had changed. A trip across town that took me 45 minutes in December was now a short 15 minute ride.

There were far fewer people in the malls as well. Sale signs are ubiquitous and many shops have already closed. 

It was clear how many people had left Dubai.

An additional complication is that the Emirate of Dubai does not have its own oil source, as does Abu Dhabi. Without the money available from oil, and now from tourism, Dubai can’t finish funding its vast development projects, such as the Palm Jumeira and the World.

These new luxury, off-coast, residential and business developments are literally sinking. They are becoming uninhabitable from water contamination issues stemming from pour plumbing and lacking waste systems. Cockroaches, sewage, and rot are driving away the few potential buyers who are still rich enough to purchase a home on these man-made islands.

What we are witnessing today is proof that Dubai’s foundation is as easily blown away as the desert sands that it is built on. Dubai was a boom town. For years it has been feed by wealthy expatriates who work there and spend there. It has been built by Indians, Pakistanis and Sri Lankans. It is staffed by Filipinos and Bangladeshis, and it is eaten up by Westerners around the world.

And here’s the catch: Despite all these problems currently plaguing Dubai, it is still a bustling and active city. Workers may be fleeing Dubai by the thousands, but when jobs come back, so will more new people. Because Dubai has not lost its international appeal, it still has the power to attract investments, tourism and dreams of a better tomorrow.

Although large numbers of Western expatriates that lived and worked in the city are gone now, Dubai is still kicking.  The bars are still active. The malls are still busy (by normal standards). Gucci skinny jeans still sidle up to Armani suits at the posh skyscraper clubs.

Nevertheless, if Dubai is going to keep floating in the long term, it must find a solid foundation on which it can thrive, or at least survive, with or without a steady cash flow from Westerners and without 9 out of 10 workers coming from another continent. The warning signs are there. There are just too many idle taxis, too many 70% off signs, and too many good hotel deals for frugal travelers. But that’s precisely what they are: warning signs.

Dubai is not passé yet, and may in fact turn out to be far more progressive and forward-thinking than what meets the eye.

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