The hotel industry is being hammered by the global economic downturn. And Dubai's image is suffering as it struggles with debts and unpaid bills.

But there was no mistaking the thrill among delegates from the 5th Arabian Hotel Investment Conference (AHIC) when they walked out on the terrace of the The Address Hotel in Dubai's Downtown district for a sunset reception on 3 May.

Not yet complete but now rising to its full height of more than 800 metres, the Burj Dubai looked, in the fading daylight, like a blue glass mountain. And every 20 minutes, an artificial lake at its foot erupted into fountains shooting 150 metres into the air to the time of an operatic aria.

The world's tallest building is a modern wonder that artfully imitates nature to redefine the centre of Dubai. Seen from the right perspective, it probably constitutes the finest urban view on earth. Millions will come to see it.

For AHIC's delegates, the sight provided welcome relief in troubled times. Hotel rates have tumbled in line with the trend in business visitors and tourists. Most of Dubai's new hotel projects have been put on hold. Many will never be reactivated. And the emirate is grappling with the largest and most challenging debt restructuring in Middle East history.

In February, after months of speculation about how it would deal with an impossible debt service schedule, Dubai announced it would sell $20bn worth of five-year bonds. The Central Bank of the UAE immediately confirmed it would buy half. The consensus is that the second half will also be bought by the central bank and that the total raised will be more than enough to meet all Dubai's needs in 2009-10.

Reviewing ratings

The lift it provided to perceptions of Dubai's creditworthiness is, however, proving to be temporary. By the middle of April, doubts began to circulate about whether the amounts available would be sufficient to meet all the obligations, overdue and imminent, of Dubai government-related entities in need of cash.

The worries were publicly expressed on 30 April when Standard & Poor's (S&P) announced it was reviewing the ratings of six Dubai government businesses. This was not because there was evidence that they would be unable to pay their debts. It was because of uncertainty about whether Nakheel, an unrated Dubai government business, would receive the unqualified support S&P believed had been promised.

The S&P statement rattled the markets and has put fresh pressure on those responsible for maintaining confidence in Dubai's ability and willingness to pay. Investors are convinced it has, or will soon get, as much money as it needs. What bothers them is the criteria that will be used to decide who gets it, for how long and on what terms. There are acute concerns that Nakheel, part of Dubai World and one of the world's most ambitious real estate developers, has not been given priority and may even be denied complete government support.

This has increased the need for Dubai to be more transparent about the way the $20bn is being distributed. The committee making the decisions is chaired by Sheikh Ahmed Bin Saeed al-Maktoum, chairman and chief executive officer of the Emirates Group and a member of the Dubai Executive Council. Four other prominent Dubai figures sit on the committee and it is being advised by Rothschild. But the rest of the story is mainly a mystery.

The challenge is not just the scale of the $20bn programme, it is the lack of rules governing how it functions. Dubai is improvising in a way that could be seriously damaging to its creditworthiness if the process loses credibility. It is, as a result, not yet free from the existential demons that the past seven months have conjured up.

That is why the sight of Burj Dubai is now worth almost as much as it cost to build. For those hoping Dubai's progress will eventually resume, there's no better inspiration this spring than a minute in its presence.