(Reuters) – Dubai nationals were alarmed by the fallout from the emirate’s debt standstill, but many hope the crisis may stem the torrent of foreigners into the conservative Gulf Arab city, where locals are outnumbered ten to one.

The freewheeling emirate, one of seven that form the United Arab Emirates, sent jitters through global markets last week when it announced that one of its flagship developers had asked for a six-month repayment freeze on some debt.

The global financial crisis over the last year has tarnished Dubai’s growth model — neo-liberal, East Asian-inspired and tightly managed from the top by ruler Sheikh Mohammed.

Construction work has slowed. Dubai’s debt pile is now estimated by Moody’s ratings agency at $100 billion.

Most Emiratis say they are proud of the UAE’s global name, gained largely through Dubai’s glamorous projects such as man-made islands in the shape of palm trees and architectural gems such as the sail-shaped Burj al-Arab hotel.

But as foreigners flocked in, Emiratis were reduced to barely a tenth of Dubai’s 1.7 million population and their share of UAE’s 4.2 million total population is not much greater.

Radio talk shows and internet debate have portrayed the issue as a crisis in the past year.

“I don’t have anything to lose in this financial crisis,” said Ebtisam al-Kitbi, a politics professor at the UAE University in al-Ain. “As an activist and academic, I view it as an advantage for us as Emiratis.”

“There was only the sound of real estate here, and if you criticized anything, they said ‘you are against development’,” Kitbi said, adding that major trading families had their own commercial interest in what was termed the “Dubai model.”

Dubai was the UAE and Gulf Arab pioneer in allowing foreigners to own property in certain areas, encouraging wealthy Arabs, Asians and Westerners to buy into the dream.

The rulers and certain merchant families have been the biggest local beneficiaries of the affluence. Most Emiratis work in the government sector and some live modestly.

While foreigners cluster in the cities and luxury skyscrapers, Emiratis tend to live separately in their own communities, jealously guarding their traditions.

“Emiratis are relieved a bit due to the international financial crisis, but it is nowhere close to where people would like to see the country heading,” said UAE blogger Ahmed Mansoor. “I believe the UAE has reached the point of no return when it comes to demographic imbalance.”

DEFIANT TONE

The tone was defiant during UAE national day celebrations this week, where miniature models of iconic Dubai buildings and Sheikh Mohammed’s book “My Vision” — lauding a “make the desert bloom” miracle — have been paraded through the streets.

On a TV talent show, the audience gave a special cheer when the name of the man behind Dubai’s “miracle” was mentioned.

The Dubai ruler, also UAE vice president and defense minister, came out fighting on Tuesday, saying the global reaction to the debt crisis had shown “a lack of understanding.”

Dissent has been muffled in a society encouraged by official media to go along with the runaway development brought about by their rulers’ policies. The UAE has a federal advisory body, but less than one percent of Emiratis are eligible to vote.

Media activity criticizing rulers or harming the economy faces heavy fines in a draft media law waiting approval.

Emirati political scientist Abdul-Khaleq Abdullah, who signed a rare petition against the draft law this year, said the authorities were now keen to assuage local concerns.

“On a fundamental level, there is a realization that this country has managed to cater to expat needs too far and they paid little attention to local, national concerns,” he said.

“They don’t want to get locals too angry. The state is one step ahead of a demand from locals.”

Foreigners are being encouraged to dress modestly, some were arrested for eating in public during the Muslim fasting month of Ramadan, and two Britons were tried last year for engaging in sexual activity out of wedlock and in public.

The foreigner majority is even cited in UAE domestic discussion as a reason for avoiding democracy, since that could encourage long-term residents to demand a say in governance.

“It’s safer to have 90 percent of the population as foreigners, as long as locals can have some kind of elite status,” said British historian Christopher Davidson, adding that Dubai paid only lip service to controlling expat inflow.