KUALA LUMPUR: It was a symbol of Dubai’s rising fortune but the Palm Jumeirah project now seems a bit out of place with the emirate’s current economic problems. Boasting a reclaimed city twice the size of Hong Kong island and super-sized Palms in the sea where buildings will be placed, developer Nakheel’s dream in the ocean, together with plans for the world’s tallest tower, have now been cut down to size due to financial realities.

According to a Financial Times report, “hyperactive sales activity has morphed into the frantic buying and selling of credit notes, which allow cash-strapped customers to recoup about half of their investments”.

Some contractors stopped trading while others gave up on Dubai as the developer could barely cover staff and operating costs.

But all is not lost. Dubai World’s chief restructuring officer Aidan Birkett, has drawn up a plan that, it is hoped, will allow Nakheel restart some of the developments that have stalled.

According to the Financial Times, US$8 billion (RM26.18 billion) out of the US$9.5 billion to be injected into Nakheel’s parent Dubai World will “flow into the developer”.

“Crucially, Nakheel is to receive US$1.5 billion even without the approval of the US$24.8 billion Dubai World restructuring proposal. This will be channelled to unpaid contractors so that work can restart on dormant construction sites,” the Financial Times reported.

Trade creditors will receive a one-off payment of Dh500,000 (RM445,128), while larger creditors will receive 40% in cash with the remainder through an Islamic bond that will be paid out in its entirety in five years.

“Customers, many of whom have been threatening Nakheel with legal action for the return of downpayments, have been offered different terms. Nakheel is due to decide during the next few weeks which so-called ‘near-term’ projects, which benefit from government support, will be resumed,” said the Financial Times report.

“Nakheel has offered customers the option of transferring 100% of payments made in long-term projects -- defined internally as ‘red’ -- to near-term, or ‘green’, projects. Dubai World insists that the ‘red’ projects are only delayed and have not been cancelled,” said the report.

“‘Red’ project customers who choose not to transfer to a soon-to-be-completed property can transfer their payments to land or property in the coming years, or wait for five years and receive their money back with no interest paid,” the report explained.