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.
There are many wonderful constructions in Dubai.( some photoes are attached).It appears more like a fancy, a show biz. than a result of concrete planned develpoment projects.
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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.
thank you very much u saved me before my exam..........it is a part of my course....
At last the truth - there have been so many stories about Dubai over the last 10 years and it's all been a sham. The whole City is built on credit - it's full of hotels and shopping malls and very fake. Abu Dhabi is going the same way and trying to encourage tourism. UAE is full of expats working on projects - no projects mean a quick exit and many have huge amounts of debt. To default on debt in UAE is a criminal offence so many just get on the next plane rather than face jail - this leaves the UAE banks very vunerable. There is a lot heartache to come yet for the region.
can read more on this one here : http://www.rantsite.co.uk/viewtopic.php?id=2&t_id=
Good post.
Would this be good time to invest in Dubai as the ouse prices are very low?
it is a nice hub , Thanks ?
Thanks to all those who have expressed their opinion on this hub.
After publishing this hub, still worse news are coming out. 'Dubai World'group of enterprises is almost on the verge of bankruptsy.Another major enterprise owned by the ruler is also about to collapse.Many thousands of Indians have already lost jobs and are returning.
Be wise in spending. Dont spend on luxury things too much.
yeah,great
I'll keep your post
Thank you Xunlei. Your hubs are also good.
I enjoyed this hub, very informative and educational.
scarey thought....what happens when the oil runs out?
Atlast Abu Dhabhi extended their helping hand this time also(God only knows What Dubai may have to surrender in return..)I hope that USD.10b will be sufficient to meet shortterm commitments....but still its hard for Dubai to recover from this situation...as said earlier Dubai borrowed too much thinking about a FUTURE INFLOW (Which didnt materialise coz of the global meltdown)
Thanks to you both.Now Abudhabhi has come forword to help to conciderable extent, mainly to save Dubaiworld, mainly.That gives some life. But at the same time, dubai has announced its further construction projects also.
Dubai is not having much oil reserve. Whereas Abudhabi has it.And , Abudhabhi is wiser in spending money than any other UAE country.
The above is very good article but the news "family commits suicide" is totally no need in this article. And also the reason for the suicide is not lost of job. He was a business man of a textile shop and he is giving salary to his staff in time. Please check two times before writing such things
Mr.Sameer,
Your observation may be right.In that case, that has to beleftout from the list of victims for the recession.But there are other victims.
Excellent hub on the financial situaion in Dubai. It just goes to show that every economy has its potential problems.
Great Hub! You have mentioned all the possible effects of recent economic crisis of Dubai. Lately I've been thinking about this matter a lot. One thought that occurred to me is this: how likely is it that so many banks could be making exactly the same mistakes at exactly the same time, so they are all imploding simultaneously? It leads me to my original premise that it was a lack of oversight from federal regulators that is the root of this problem.
thanks for your sharing here.
Yes.Mr.Forex learner,Your thought is right. When FIs ,follow a blind hope, they all fall to pit simultteneously.
thank you for sharing such an information with us.
n can u help me out with the current scenario of dubai debt crisis.
Very informative. GOod HUbs help you stay in the know, and get there, too.
As long as Dubai has Abu Dhabi, they are unlikely to fail although Abu Dhabi is realising that it does want something in return for its investment into Dubai.
I think they'll be ok since they have such financial liquidity unlike non Oil rich countries.
Zaheer
Interesting. I am from the UK so love ready about the influence of Dubai. It is a fascinating place.
keep update your post , the given information is worth remembering .
How Much Was Total Loss for Dubai During The Crisis and n can u help me out with the current scenario of dubai debt crisis.
Dear Mr.Zaman,
The 'loss'is to be estimated in terms of its inability to repay the loans.No clear cut amount in that regard is available.
However, it is maore than a year i published this hub and now, with the help of Abudhabhi,Dubai has recovered to conciderable extent.Now its economy is progrressing and the government there has taken strict measures about outside employees,cuts in salaries , check on unwise expenses and investments etc.
It is now slowly picking up.
Thanks for this hub. Keep posting.
Yes Mr. Morson,
I visited your article. Its really good.
When was this article written? Please tell me the exact date that this article was published.
This is published some 14 months ago.
Great article
yep so we're gonna go broke :(
its great for financial student and analyst to knw abt the reason of crisis in dubai
The world crisis is reflecting itself in Dubai since it is a business hub.
Hello Prasadjain
Thanks for this post. It was interesting to read this hub. True that the Dubai crisis was covered globally a couple of years ago.
I would like to add a few promises Dubai offers in spite of these challenges... as a tribute to the place which helped me fend for myself for nearly a decade.
After working in Dubai I left to check out other market hubs in the south, west & east. I came back to Dubai because I still choose it among anywhere else to live and work for its safety, predictable climate and multi-nationalism. I currently work on a project where each of my colleagues are from a different ethnicity.... Arabs, Europeans, Americans, Asians, Africans. Where else in the world would I get such an opportunity to enrich myself. As typical of all melting pots of culture there are challenges but work-arounds are definitely available if we persevere. :o)
Rgds
do you need a loan if yes contact us via adamsmorganloanoffer@gmail.com
Thank you prasad. this talk helped me to pickup the current status of dubai........How about comming to dubai for job hunt in dec 2011.Iam an MBAgraduate with more than one year experience in IBM..........would that be a risky option or chances are there ah?????
I am looking to hear from you soon.
Thanks and regards
Mohammed.
It is not a risky option. Now the condition is improving there. but it is better if you come on sponsoring by govt Agency of Dubai, rather private parties.
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As a mother, i was devastated, owing to the fact that i just lost
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De-globalisation is here to stay. How will this affect Dubai, UAE is anybody's guess.
Situation today (Q1) 2012: In a nut shell, the present international financial scenario is roughly as follows: The financial crisis and global economic meltdown of the last 3 years has shown one aspect clearly that generally banks had too much leverage. As a first stage of rectification to this, European banks are now leading a backwards charge.
In the year 2011, the Euro Zone lenders had US$1.2 trillion of assets in emerging markets which was double the amount just seven years earlier. Please remember that a big chunk of those assets are supported by the parent bank's capital and funding. With capital scarce and funding costs high, retreat is the only option. Europe's banks are also pulling back on the business of lending in dollars, which were often borrowed from US money market funds. After US investors fled from Europe last year as that business looked too risky. This is the new crisis emerging in Q1 of 2012 and contributing to de-globalisation.
Capital-short banks in Europe and elsewhere have sold foreign businesses. Today the UK government has accepted the recommendation of its Independent Commission on Banking to ring fence domestic retail banking operations, making foreign and investment banking units less appealing. The US's latest stress tests effectively punished big US lenders with extensive European operations by requiring them to be able to withstand a Euro Zone meltdown. Governments also want financial institutions to concentrate their efforts at home. Politicians no longer see any advantage in hosting global financial champions, but stress the value of lending to local small businesses and consumers.
With this in mind, our proposition is a differentiator today. We have effectively ring fenced your overseas exposure in such a way that notwithstanding any economic turmoil in the Euro Zone going forward, your assets will be protected.
Thanks a lot Mr.Ramesh , for adding so many useful points here. If de-globalisation is going to happen,then automatically World trade should fall down. As a result,exporters in many countries are likely to suffer.So also-the export related industries.That may affect our exporters also.AS a consequence, the land rate here may fall down to some extent.Some of our highly paid youth may draw lesser salary.
Thank you for the information. Eye Opener
I'm hearing some warnings that this same issue is looming on China's horizon now. A lot of the growth there is debt financed and there is a growing concern about what will happen to the debt on the projects that don't succeed.
Joel, author
Yes, there are such news.
Agree with Prasadjain's observations:
The European economic imbroglio will certainly have a ripple effect as far as the Indian economy is concerned going forward into 2013/14. The main tasks at hand are to reduce inflation, initiate an economic stimulus, concentrate to further infrastructure development, reduce subsidies, bring in more foreign JV collaborations, prop up the growing Indian Middle Class, etc. What is India currently doing about this, for starters the Indian Central Bank (RBI) is already working on what they believe is an inflation reducing exercise by announcing reduction in interest rates on loans and soon deposits will follow. Will this actually reduce the inflation or increase is to be seen. Various reforms need to continue at a faster pace to keep the economy growing and reduce the impact of the ongoing European financial struggle.
Thank you Mr. Ramesh
hafeezrm Level 5 Commenter 2 years 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.