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Dubai must be seen to be believed. Even its skyline is unreal--rising straight out of the desert and now dominated by the 2625 ft tall, 160-story, silver and glass structure, the Burj Khalifa, built by Samsung to be twice as tall as the Empire State Building in New York. But two months after its grand opening, the Burj remains mostly empty with its observation deck closed to visitors--perhaps symbolic of the fate of this Emirate, which has recently become dependent on huge amounts of short-term debt to keep its economy going.

As the asset bubble bursts worldwide, Dubai's real estate assets have depreciated by as much as 80 percent and creditors have come calling. Cranes, which are still to be found everywhere, are mostly silent, and buildings remain unfinished everywhere in this sprawling city. In the absence of real data, rumors abound about just how much Dubai owes to banks and exactly how it will meet its obligations in 2013 when a large chunk of its debt--perhaps as much as $80 billion--will come due.

I have spent the past two weeks here in Dubai, as a visitor with the Dubai Economic Council. We are conducting a survey of businesses in Dubai--the first of its kind--to determine the constraints and expectations of businesses as Dubai recovers from the economic crisis. I have spent time talking to business owners, policymakers and visiting the Jebel Ali Free Zone. The question on everyone's mind: Is this the end of Dubai as we know it?

I am not so sure. Although the construction binge looks like a gargantuan mistake for which the Emirate will pay dearly, other investments are much more sensible and are likely to pay off in the long run. Take the Jebel Ali Free Zone (JAFZA) for instance. This zone is located next to the Jebel Ali Port (the largest port in the Middle East) and is part of Dubai based, state owned Economic Zones World, one of the world’s biggest developers of Economic Zones, logistics systems and industrial parks. JAFZA began operations in 1985 with 19 businesses and has now grown to include 6400 manufacturing, services and other businesses from 120 countries.

On the other side of JAFZA is the new Al Maktoum International Airport, which will be the world’s largest cargo airport, making Jafza is the only free zone in the world to be located between the two major transportation hubs. Jafza's goal is to transfer goods from sea to air in just 20 minutes--an ambitious target that will continue to position the strategically-located Emirate of Dubai to serve markets in South and West Asia as well as the Middle East and Africa. The Jebel Ali port is the flagship port of Dubai Ports World which is one of the largest marine terminal operators in the world, with 49 terminals and 12 new developments across 31 countries. DP World was the source of much controversy in the United States some years ago when it made a bid to manage six American ports. (That contract eventually went to a subsidiary of AIG; in hindsight DP World might have been a better choice!).

A recent report by the World Bank points to the need for massive infrastructure investments in Africa; my own earlier work surveying business owners points to the same result. Dubai has built the infrastructure investments that many developing countries so desperately need--a well-maintained network of roads, a large air terminal with another under construction, and a port that is among the best in the world. Along with the skilled labor that it attracts from all corners of the world, Dubai has positioned itself as a global leader in trans-shipment, services and logistics systems. Will these investments will be enough to offset its current woes? Whatever the answer, there is no doubt that Dubai's infrastructure investments are a key ingredient to future growth, not just in the Emirate but in the wider region in which it is located.

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CGD blog posts reflect the views of the authors drawing on prior research and experience in their areas of expertise. CGD does not take institutional positions.