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Work stops on world’s highest tower amid fears of Middle East meltdown

Nakheel, the state owned developer, famous for its palm tree shaped islands, confirmed that it has delayed work on the iconic one kilometere high tower for at least a year.

It is seen by commentators as a sign that Dubai, a city that seemed to have limitless resources and ambition, is now struggling to avoid a hard crash.

'This is the most high profile development to be affected to date by the credit crunch. It was launched in a fanfare of publicity in October and now it is debatable when work will resume,' said one property analyst.

Nakheel said it has postponed construction so that it can readjusts its plans 'to better reflect the current market trends and match supply with demand' and emphasized that work on the $38 billion Harbour & Tower commercial and residential project should resume in a year.

'Further work on the foundations of Nakheel Harbour & Tower will commence in 12 months. The foundation works are likely to take approximately three years to complete. This is part of our readjustment of our immediate business plans, to better reflect the current market trends and match supply with demand,' a spokesman said.

The suspension comes after Nakheel stopped work in December on Trump Tower, a $789.5 million project on one of the emirate's palm-shaped islands.

In November, the developer said it had cut 500 jobs or 15% of its workforce because of the global economic downturn.

It is not just Nakheel that is having to cut back. Developers throughout the United Arab Emirates are struggling to finance developments and sell real estate as credit dries up the property price boom ends.

A number of Dubai developers have cut staff, scaled back and reviewed projects as the global financial crisis hits the once-booming real estate sector of the Gulf emirate.