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Dubai in trouble





menino
You'll might have heard the latest news about Dubai being in financial turmoil, with its 2 major construction developers = Dubai World and Nakheel, which require more time to pay its creditors, and requires help from Abu Dhabi.

Its a real shocker, that Dubai has also fallen under the financial crisis.
Although Dubai does not depend on oil, it depends a bit on tourism and is the business hub of the middle east.
Who would have thought that it would affect Dubai with Billions in loans. I believe that Dubai world owes its creditors $27 billion.

Although the brakes were slammed more than a year ago on more than 100 new building projects, Sheikh Mohammed bin Rashid Al Maktoum's vision is getting blurry, when he was once looked up as a visioneer for bringing Dubai up.

Hopefully this crisis will be over soon, for the Middle east.
jwellsy
The Dubai situation could get very ugly. This is the kind of thing that could cause a ripple affect.

I heard that Iran owns a third of Dubai World. If they go bankrupt, many people will try and use that as proof that capitalism doesn't work.
deanhills
This is a typical situation that is taken completely out of whack with reality. The UAE is a very wealthy country. It has seven Emirates (like States), and the two wealthy ones are the Emirates of Abu Dhabi and Dubai. The Emirate of Abu Dhabi is the one that has the Government in it as well as all the oil. Dubai is the Emirate that has gone full out to make riches Western style with building properties etc. It does not have much oil in it. There has been a property bubble going on for years in a City that has grown much too fast. In January of this year, when the BIG recession took off world wide, the Abu Dhabi Government made an undertaking to assist the Emirate of Dubai with its problems. But it is not doing it blindly though and doing it case by case. What got highlighted was one case, where the Investment Company was trying to postpone repayments for six months. And then when an argument developed about it, it became a case of the Company not having Government backing. Instead of focussing on the actual negotiations to repay the debt. The real damage that happened was after the world media had made it into an enormous crisis, as at that very point construction projects in Dubai came to a stop. People started to panick. I wonder how popular the media is currently with the Government of the Emirate of Dubai?

It is nonsensical to think that all major construction projects in the UAE must be backed by the Government of the UAE. Surely that is not the case in Western countries. When the US bailed out Banks they did it on a completely selective basis. They also allowed some to fail. The case in Dubai had not failed yet, it was trying to find a way around its problems. The media however did a very good job on it to make it fail if it had not failed before.
atul2242
Well talking to my friends in Dubai - they found humor in the news ....
menino
Although Dubai comes under the Emirates, they operate separately, by different sheikhs (like Kings).
Also each Emirate has its own government.
But your point duly noted, Deanhills.

Although the major construction companies are in debt, it has a domino effect on the banks that has given it the loans in the first place, which have a financial problem of their own.
I believe that there was a meeting on this with the banks to negotiate with those companies.

But if Dubai goes down, a lot of companies and people will suffer, as they already have.
As you know i-mate which is a mobile maker and based in Dubai, closed down this year already.
menino
I just got news that parts of Dubai will be sold to Abu Dhabi to pay off the loans defaulted.
IF thats the case, its still going to have a domino effect on several economies of different countries.
deanhills
menino wrote:
I just got news that parts of Dubai will be sold to Abu Dhabi to pay off the loans defaulted.
IF thats the case, its still going to have a domino effect on several economies of different countries.
Dubai will be OK. For me there is no doubt about that. I spent a few days there most recently and it is as thriving as it has ever been. Nobody is talking about this. Sheikh Mohamed El Maktoum, the ruler of the Emirate of Dubai is very strong, well positioned and has lots of support. There are negotiations within negotiations going on in the background as this is a country where everything is negotiated and there is always a little bit of posturing involved.
hunnyhiteshseth
yes exactly, in hindsight I feel Dubai World incident had a positive effect on market! the very fact that nothing major happened after the news of debt default of Dubai World made the market confident and increased investor confidence!
deanhills
hunnyhiteshseth wrote:
yes exactly, in hindsight I feel Dubai World incident had a positive effect on market! the very fact that nothing major happened after the news of debt default of Dubai World made the market confident and increased investor confidence!
You are totally on the number. This was exactly what was broadcasted in tonight's news. Also that there has not been a single default on any of the loans that had been at the centre of the whole debacle. There has also been a major correction in the stock market in Dubai, so who knows, maybe someone did this deliberately to create a run and a correction in the stock markets? I guess everything is possible?
hunnyhiteshseth
deanhills wrote:
so who knows, maybe someone did this deliberately to create a run and a correction in the stock markets? I guess everything is possible?


Lolz. Yeah... but then you can have conspiracy theory for anything!!
deanhills
hunnyhiteshseth wrote:
deanhills wrote:
so who knows, maybe someone did this deliberately to create a run and a correction in the stock markets? I guess everything is possible?


Lolz. Yeah... but then you can have conspiracy theory for anything!!
Right! When there is lack of transparency of information, conspiracy theories always seem to be handy to have around. Let's hope it was just a lucky consequence of the media hype that the stock markets took off. Twisted Evil
menino
It would be interesting, if this was played out, but Dubai is losing out, as it has to seel its lands to Abu Dhabi, so I doubt it would be a conspiracy theory.
Whats more plausible is that the stock market and investors are taking advantage of the situation, which happens all the time.
gandalfthegrey
Does anyone else find it insane that they are trying to build and sustain a metropolis in a desert!?! Considering food and water are crucial to life, and how expensive (and unsustainable) it is to build what they are building, why do it? I know I know - that is their country and they have no where else to do it.

I won't be surprised if Dubai eventually becomes an abandoned city when it becomes to expensive to maintain after the oil (and oil money) is gone.
deanhills
gandalfthegrey wrote:
Does anyone else find it insane that they are trying to build and sustain a metropolis in a desert!?! Considering food and water are crucial to life, and how expensive (and unsustainable) it is to build what they are building, why do it? I know I know - that is their country and they have no where else to do it.

I won't be surprised if Dubai eventually becomes an abandoned city when it becomes to expensive to maintain after the oil (and oil money) is gone.
Hmmmm .... so how about Las Vegas? Given that it uses quite a bit of electricity as well? Offsetting positive is that it does generate lots of money? So ditto Dubai. Dubai has been a thriving Trade Centre in the Middle East for centuries, not only the last few decades. So in essence it has upgraded itself to compete better and it is doing very well with that. It did overextend itself with building properties, but so has all of the other developing countries of the world. This will sort itself out eventually, but not immediately though. Dubai used to be regarded a cheap place to set up a business. It is no longer cheap, all the infrastructure comes at a price, I believe that the way business is going to be conducted is going to change. For example all of the very well to do Universities like Harvard, are setting up pilot campuses in Dubai. Large global companies are shifting their Headquarters to Dubai, as a serious city to do business in.
menino
I thought that Dubai was under immense trouble, but the current situation says otherwise, especially with the opening of its Burj tower, which is the tallest in the world, and already has customers buying floors and apartments in it.
As to Dubai ever going down the drain - that is never likely to happen. If economy gets crunched, business will still move, albeit a slower pace, but it will never come to a halt.
deanhills
menino wrote:
I thought that Dubai was under immense trouble, but the current situation says otherwise, especially with the opening of its Burj tower, which is the tallest in the world, and already has customers buying floors and apartments in it.
As to Dubai ever going down the drain - that is never likely to happen. If economy gets crunched, business will still move, albeit a slower pace, but it will never come to a halt.
Good point. I also believe this is something to do with politics and debt negotiations between Abu Dhabi and Dubai. This is an environment where bartering and negotiations have been part of business for centuries and centuries. People need to visit Dubai and witness things for themselves. All the malls are full of visitors, but they are being selective, as possibly there are more malls than are really needed. Also more buildings have been built than are needed. If they mention cars that are being left at the airport, that has happened from the beginning of time. People overextend themselves with credit cards or can't extricate themselves easily from their contracts, or there may be some other personal reasons, and then choose to do what is referred to as a "chicken run". For example if someone should leave the UAE they would need to do a huge number of clearances, for banking, electricity, phone accounts, residence, sponsor, selling furniture and car, it can be quite stressful, so some people may decide that they have more to loose by doing the clearances.
soljarag
a few months ago my friend got back from being in Dubi for a year on a contract job..... he said he couldnt stand it, he was surrounded by deasert and could only go in the city about 3 times a month. and when he did go in the city it was so expensive
deanhills
soljarag wrote:
a few months ago my friend got back from being in Dubi for a year on a contract job..... he said he couldnt stand it, he was surrounded by deasert and could only go in the city about 3 times a month. and when he did go in the city it was so expensive
I don't blame him. He must have been part of a construction crew? They usually live in compounds outside Dubai and are completely isolated from "real Dubai". Dubai is very expensive, especially all the new malls, but if he could have visited it more regularly, he would have found ways to do Dubai cheaply. Dubai now has an underground rail service that is very cheap. And there are souks (markets) that are still authentic and where one can negotiate prices. They are also very interesting to look at and really good deals can be found.
menino
My friend went to Dubai last year, and he found it changed; Before it was more free, and people were nicer, but lately, its become more strict, and people are rude now than before.
And as you mentioned it is expensive as well.
Living there is highly expensive as well, where you have to pay yearly or semi annually.
deanhills
menino wrote:
My friend went to Dubai last year, and he found it changed; Before it was more free, and people were nicer, but lately, its become more strict, and people are rude now than before.
And as you mentioned it is expensive as well.
Living there is highly expensive as well, where you have to pay yearly or semi annually.
That is quite true. Dubai is really expensive. Accommodtion is cheaper than it was a year ago, however still high in cost, relative to other countries. I much prefer the traditional old souks than the malls however, and there are always good bargains to be found in those souks. The malls are just too much of a muchness. I prefer the old character places where one can still negotiate a price for your purchases. That can be real fun. Such as buying a Persian carpet in the Sharjah Blue Souk. That is priceless to watch and to participate in.
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