FINANCIAL CRISIS IN DUBAI-REASONS AND EFFECTS
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Dubai-economic position
That is Dubai-sky piercing towers, rotating buildings, spectacular architectural designs,flow of petro-dollers,broad and clean road notworks, etc,etc.Businessmen, investers, and lusury-seekers, used to visit Dubai with all zeal.
Some weeks ago, Dubai had issued to international investers, bonds worth $1.9trillion,whiched sent the message that its economic position is unshakable!
But now that foundation has shaken!
inability to rapay loan instalments
DUBAI government has announced just recently, that it is,for the timebeing , not in a position to repay its outstanding debt of $7,40,000.At the same time, Government owned mega finance institution-DUBAI WORLD also declared that it may not be able to repay any loan for 6months.This 'Dubai World' is engaged in different business enterprises like-transport,ship building,township building,etc.A sister-concern of Dubai world,a building construction company, named NAKHEEL is also telling that it requires some more time to repay its debt instalments.
All these indicate that Dubai's financial foundation is ...... SHAKING!
Reasons
Dubai, unlike other six emirates of UAE is not a country rich with oil resources.This city state is purely a business city wholly depending upon tourism and other businesses.Dubai World, in a haste to attract world enterprenuers started spending more and more on building fine roads, star hotels,etc. Foreign institutional investers also invested much here, especially during the last four years.But, for some reason, may be due to economic crisis mainly, FIIs didnot turn to Dubai for investment..AS a result, real-estate businessin Dubai suddenly collapsed.This made an impact on other businesses also.
Effects
Dubai world, has business tie-ups in different countries including India.Thes projects, may be delayed( resulting in cost increase), or dropped, or prolonged.
Unemployment problem may arise in Dubai. Enterprises may have to retrench a portion of their employees.!0 lakh Indians are working in Dubai and other UAE countries.
Foreign Institutional investers, who have business ties with Dubai World, may face loss.70 financial institutions have lent credits to Dubai world.
Banks in Duabi may face crisis.
When the world is recovering from last year's economic recession, this may push it back to same position.
Ray of hope.
Inspite of all these, experts hope that it is possible to recover.It comes out of past experience. Dubai had faced similar economic crisis in 1999.Then Abudhabhi, another emirette in UAE, had helped Dubai by lending a loan of $1,00,000.Abudhabhi is a financially stable country..It can help.
But the quantum of need this time is muchmore than it was in 1999.Just on 29th,November,Abudhabhi has announced that it would concider the financing aspect,item wise, taking each main transaction on merits.It has also clarified,it is not going to take full responsibility of all loans.
- Top ten financial institutions of the world
By greater optimism and assurances by America, major part of the world succumbed to globalization and WTC agreements. American companies, for their profit, encouraged the buying habits of people in the globe,...
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Comments
I thank you for this hub which gives us an idea about the financial position of Dubai.
Dubai will remain a dream for all
Tanks a lot
A dream land suddenly succumb to collapse is nicely described in this hub where economy for non oil state is in crisis. Thank you for such hub described in so lucid manner that a lay man can understand the economic collapse.
Economic fall of
Dubai may create quite big problems in India too. Thousands of Keraleans are therre working as plumbers, truck drivers,and construction workers. They have gone there with barrowed money with the hope of returning it by their earning therre. But now Dubai is not in a position to offer work, as construction bussiness itself has gone down. God only can save those families!
Great Hub! You have mentioned all the possible effects of recent economic crisis of Dubai. I pray God for the quick recovery as many of investors and employees there could retain their life!
Thanks to you all.
Hari
The loan amounts mentioned on the above article are incorrect. The Dubai World's debt amount is US $ 58B (previsously said) now it is said to be US $ 28 B. This is a corporation which has faced the crisis as the other compnaies in the world.
The amount mentioned in the article is what is quoted in the responsible magazines.
The crisisd faced by other companies which produce something and face loss due to lack of sales, is different from loss another company faces by lack of turnover. Dubai worl'd loss is due to ots over dependence on travellers and hotrel business.We should not depend on the 'spending habit ' of others.
There is growing concern among leading international economists that there are other bubbles waiting to burst. There is plenty of attention on Greece right now, where the 2009 budget deficit is expected to be more than 12 percent of GDP.
Other small eastern-European nations are also under scrutiny, with some doomsday analysts suggesting that British economy could still implode given its burgeoning debt.
Yes, it is true thateconomists are expecting some such things.12% deficit is really not a symbol of good economic management.
Modern lifestyle and business has forgotten one common-sense point, which elders in all countries used to advise to youngsters. That is-it is not wise to develop spending habit on unnessery things. The other version of the point is-don't develop your business based on the spending tendency of people.That's neither healthy nor desirable.But unfortunately,all rich countries are doing it. America is the first criminal in this regard.
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hafeezrm says:
8 days ago
Another short and sweet hub by Prasadjain. It gives a clear message of balancing between liquidity and solvency. Once an entity falls into a vicious circle of using borrowed money to solve its financial crisis, it seldom recovers. How far Abu Dhabi can help its sister state, the magnitude of the problem is astronomical?
When troubles come they come not in single spies but in battalion.