Dubai Debt Crisis

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DUBAI DEBT CRISIS

INTRODUCTION
Dubai is one of the seven emirates of the United Arab Emirates (UAE). It is located south of the Persian Gulf on the Arabian Peninsula. The Dubai Municipality is sometimes called Dubai state to distinguish it from the emirate. Written accounts document the existence of the city for at least 150 years prior to the formation of the UAE. Legal, political, military and economic functions with the other emirates within a federal framework, although each emirate has jurisdiction over some functions such as civic law enforcement and provision and upkeep of local facilities. Dubai has been ruled by the Al Maktoum dynasty since 1833. Dubai's current ruler, Mohammed bin Rashid Al Maktoum, is also the Prime Minister and Vice President of the UAE. The emirate's main revenues are from tourism, property and financial services. Although Dubai's economy was originally built on the oil industry, revenues from petroleum and natural gas currently contribute less than 6% (2006)of the emirate's US$ 80 billion economy (2009). Property and construction contributed 22.6% to the economy in 2005, before the current large-scale construction boom. Dubai has attracted attention through its real estate projects and sports events. This increased attention, coinciding with its emergence as a Global City and business hub, has highlighted labour and human rights issues concerning its largely South Asian workforce. Established in 2004, the Dubai International Finance Centre was intended as a landmark project to turn Dubai into a major international hub for banks and finance to rivals New York, London and HongKong. Dubai's gross domestic product as of 2005 was US$37 billion. Although Dubai's economy was built on the back of the oil industry, revenues from oil and natural gas currently account for less than 6% of the emirate's revenues. It is estimated that Dubai produces 240,000 barrels of oil a day and substantial quantities of gas from offshore fields. The emirate's share in UAE's gas revenues is about 2%. Dubai's oil reserves have diminished significantly and are expected to be exhausted in 20 years. Property and construction (22.6%), trade (16%),entrepôt (15%) and financial services (11%) are the largest contributors to Dubai's economy. OVERVIEW OF DUBAI’S FINANCIAL POSITION

The Dubai Financial Market (DFM) was established in March 2000 as a secondary market for trading securities and bonds, both local and foreign. As of fourth quarter 2006, its trading volume stood at about 400 billion shares, worth US$ 95 billion in total. The DFM had a market capitalization of about US$ 87 billion. The government's decision to diversify from a trade-based, but oil-reliant, economy to one that is service and tourism-oriented has made property more valuable, resulting in the property appreciation from 2004–2006. A longer-term assessment of Dubai's property market, however, showed depreciation; some properties lost as much as 64% of their value from 2001 to November 2008. The large scale real estate development projects have led to the construction of some of the tallest skyscrapers and largest projects in the world such as the Emirates Towers, the Burj Dubai, the Palm Islands and the world's second tallest, and most expensive hotel, the Burj Al Arab. Dubai's top re-exporting destinations include Iran (US$ 790 million), India(US$ 204 million) and Saudi Arabia (US$ 194 million). The emirate's top import sources are Japan (US$ 1.5 billion), China (US$ 1.4 billion) and the United States(US$ 1.4 billion). Dubai's property market has experienced a major downturn in 2008/2009, as a result of the slowing economic climate. Mohammed al-Abbar council of the sheik told the international press in December 2008 that Emaar had credits of US$70 billions and the state of Dubai additional USD 10 billions while holding estimated USD 350 billion in real estate assets. By early 2009, the situation had worsened with the global economic crisis taking a...
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