The Dubai Financial Crisis is the extension of the Sub prime crisis and is similar to the 1990’s crisis of the TIGER Economies.
Dubai is a place with piercing towers, rotating buildings, spectacular architectural designs, flow of petrodollars, broad and clean road networks, Businessmen, investors, and luxury-seekers, used to visit Dubai with all zeal. As Dubai is not rich in Oil Resources unlike other six parts of UAE, it relies totally on the tourism revenues and that is the reason that it invests so much on the Real Estate. Not only Dubai but the whole world used to believe on the credibility of Dubai. So, while raising the money through Investor Bonds (1.9 Trillion Dollars), Dubai did not face any problem, FIIs were also investing with the full flow to the Dubai Exchanges. Due to all this a bubble of assets had been blown which busted in November 2009. The history of all this is as follows. The company is a classic example of huge borrowing beyond its means.
In short, the company borrowed a huge amount from banks to finance its various projects during the 2005-08 boom periods but failed to come up with a repayment plan. The global crisis of 2008 triggered the crisis and it never recovered from the blow. Dubai accumulated $80 billion of debt by expanding in banking, real estate and transportation before the financial markets were hit by the global crisis. Dubai World accounts for $59 billion of these liabilities and it doesn’t have money to repay this debt. Dubai suffered the world’s steepest property slump in the global credit crisis as home prices fell 50 per cent from their 2008 peak.
Dubai said that it is not in a position to repay its outstanding debt of $7, 40,000. 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 installments
Due to this FIIs stop investing the Dubai’s Economy. This was very similar to what had happened to South East Asian countries in the 1990’s.
Dubai is a place with piercing towers, rotating buildings, spectacular architectural designs, flow of petrodollars, broad and clean road networks, Businessmen, investors, and luxury-seekers, used to visit Dubai with all zeal. As Dubai is not rich in Oil Resources unlike other six parts of UAE, it relies totally on the tourism revenues and that is the reason that it invests so much on the Real Estate. Not only Dubai but the whole world used to believe on the credibility of Dubai. So, while raising the money through Investor Bonds (1.9 Trillion Dollars), Dubai did not face any problem, FIIs were also investing with the full flow to the Dubai Exchanges. Due to all this a bubble of assets had been blown which busted in November 2009. The history of all this is as follows. The company is a classic example of huge borrowing beyond its means.
In short, the company borrowed a huge amount from banks to finance its various projects during the 2005-08 boom periods but failed to come up with a repayment plan. The global crisis of 2008 triggered the crisis and it never recovered from the blow. Dubai accumulated $80 billion of debt by expanding in banking, real estate and transportation before the financial markets were hit by the global crisis. Dubai World accounts for $59 billion of these liabilities and it doesn’t have money to repay this debt. Dubai suffered the world’s steepest property slump in the global credit crisis as home prices fell 50 per cent from their 2008 peak.
Dubai said that it is not in a position to repay its outstanding debt of $7, 40,000. 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 installments
Due to this FIIs stop investing the Dubai’s Economy. This was very similar to what had happened to South East Asian countries in the 1990’s.
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