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Dubai, emirate of extravagance and superlatives, laid claim to an extraordinary new record yesterday with a multibillion dollar plan to build the world's tallest tower in the face of deepening global financial gloom.

The tower, at the centre of the Nakheel port and harbour complex, is to be "over one kilometre" high and have more than 200 floors, beating its nearest rival, the existing Burj Dubai tower, still under construction and due to rise to a mere 818 metres.

The latest first for this tiny Gulf state, the glitziest of the seven members of the United Arab Emirates, will incorporate traditional Islamic styles for its extensive gardens, waterfront and bridges.

"It sends another message to the world that Dubai has a vision like no other place on Earth," said Sultan Ahmed Bin Sulayem, chairman of Dubai World, the parent company of developer Nakheel.

"At more than a kilometre high this is an unbelievably groundbreaking design," boasted Chris O'Donnell, Nakheel's Australian CEO. "We are pushing the boundaries of sustainable design."

Abu Dhabi, the capital of the emirates, grabbed attention in Britain last month when it bought Manchester City football club. Dubai failed to do the same with Liverpool FC, but analysts say this new project is dazzling evidence of its confidence in the face of the credit crunch and worries about global recession.

Its ruler, Sheikh Mohammed Bin Rashid al-Maktoum, famous for breeding and racing thoroughbred horses, and for his $18bn (£10bn) fortune, was due to give it his blessing at a VIP launch last night.

The complex will provide homes and offices for 100,000 people. If all the reinforcing bars were laid end to end they would stretch from Dubai to New York - one quarter of the way round the world.

The tower will be so tall that it will have five different micro-climates.

The temperature in the atmosphere at the top of the building could be as much as 10 degrees cooler than at the bottom. High-speed lifts will allow people to see the sunset twice - from the bottom and again from the top of the building.

Pressed on the issue of height, O'Donnell said: "We are building a tower that's going to be over one kilometre. This is a complete iconic development. It may be the tallest. Someone may build something taller."

Developers in Saudi Arabia and Kuwait will doubtless take note.

Indoor ski slopes

Dubai, once a sleepy fishing and pearling port, is already home to some of the biggest and busiest shopping malls on the planet, as well as indoor ski slopes in a desert country where the temperature is regularly over 40C (104F) .

Nakheel is famous for its signature Palm Jumeira island and is building two other offshore Palm developments that will extend Dubai's 70km coastline to 100km.

Last month Jumeira saw the opening of the massive $1.5bn Atlantis Hotel, where guests can pay a $25,000 a night for a room and gaze at sharks in a vast aquarium in the lobby. It is to be inaugurated by Kylie Minogue next month, in spite of fears of a terrorist attack.

The launch of the port and harbour complex was accompanied by a loud PR fanfare (the Guardian was invited to attend with other international media). But it left key questions unanswered, not least the cost of the project at a time of tightening credit, falling oil prices and stock markets and a sense that the Gulf is not immune to the effects of the world financial crisis.

"We all know the world is experiencing incredible market movement, " said O'Donnell. "This will have an impact on the Middle East, but our view is that it will be relatively small. This will be built over 10 years. I can guarantee we will have many more cycles over this period."

Islamic influence

Nakheel was keen to stress that the design includes Islamic elements inspired by the Alhambra in Spain, the harbour of Alexandria in Egypt, the promenade of Tangier in Morocco, and the bridges of Isfahan in Iran.

That looks like a gesture to Arabs and Muslims uncomfortable with the influx of expatriates to this most globalised of Middle Eastern cities, where over 80% of the 1.3 million population are foreigners.

The message that Dubai has a vision is not new, even if the circumstances are changing for the worse.

"We have been bombarded with the tallest, the best, the largest, for the past few years," sighed Prof Abdelkhaleq Abdullah of Emirates University. "The novelty has gone.

"In Dubai they like to project confidence but they turn out to be right. They don't chicken out like the others do. They go for the market and the publicity stunt.

"Doom and gloom about Dubai has been around from day one; they say we are over-ambitious, that we are stretching our reserves, that there will be a crash. There will be a crash one day, but not yet. The leadership is amazingly confident. Still, I wish there would be a slowdown because we can't sustain this double-digit growth."

Dizzying heights
• The tower will be more than 1km high

• It will have more than 200 floors and 150 lifts

• Approximately 30,000 workers involved in construction

• 10,000 parking spaces

• There will be another 40 towers ranging in height from 20 floors to 90 floors (250m-350m)

• The complex will have more than 19,000 residential apartments

• There will also be more than 3,500 hotel rooms and a super luxury 100-room hotel will be located at the top of Nakheel tower