Dubai - A crisis unfolds

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CASE STUDY
ON
DUBAI – A CRISIS UNFOLDS
SYMBIOSIS LAW SCHOOL, PUNE
CONSTITUENT OF SYMBIOSIS INTERNATIONAL UNIVERSITY
Anirudh Ahuja1, Hussain Patel2, Saumya Singh3, Shalini Singh4, Rushil Deshpande5, Tanya Nagi6, Vaibhav Handu7.

ABSTRACT

Boom! That’s the sound of Dubai going from prosperity to penury. In November 2009 a financial crisis surfaced in Dubai, the symbol of luxury, where Sheikh’s drove around in Ferraris, visited mega sized malls and dined at the 7 stared hotel, The Burj Al Arab. Behind the rising storeys of The Burj Khalifa (the tallest building in the world), the Dubai economy collapsed; real estate prices slashed by nearly 50%, multi-million dollar projects were left incomplete and thousands of workers were laid off. Most of Dubai’s boastful architectural marvels were built on the back of loans taken by real estate companies like Nakheel and Emaar. That is why; an incredible development rate was seen during the years 2000 and 2008. The objective of this case study is to bring to light the economic crisis that unfolded in Dubai during 2009 which most people weren’t aware about as the world recession had stolen limelight. Furthermore, we will discuss the importance of Dubai in today’s world and its potential to grow. We’d also like to suggest ways in which Dubai can help be a more productive economy and create a more global environment. The research methodology used is extensive secondary research. The findings made are that Dubai’s economy is recovering as of 2012 and the market is stabilizing. The steps taken such as the Draft Investor Protection Law are attracting investors and that Dubai has a key role to play in today’s world.

KEY WORDS – Nakheel, Emaar, Entrepot, Sheikh Mohammed bin Rashid Al Maktoum and Burj Khalifa.

CASE STUDY
ON
DUBAI – A CRISIS UNFOLDS
SYMBIOSIS LAW SCHOOL, PUNE
CONSTITUENT OF SYMBIOSIS INTERNATIONAL UNIVERSITY
Anirudh Ahuja8, Hussain Patel9, Saumya Singh10, Shalini Singh11, Rushil Deshpande12, Tanya Nagi13, Vaibhav Handu14.

INTRODUCTION

Biggest, tallest and richest; that’s the motto upon which Mohammed bin Rashid Al Maktoum and his ancestors have built paradise in a desert. Dubai, a city which was once just a desert until the discovery of oil in 1966 is now a financial hub. Between the years 2000 and 2008, Dubai saw outrageous financial and infrastructural boom. The rate of development was unbelievable. Towers were being erected within a snap of the finger. On the back of the oil industry, Dubai began its expansion but today, its main sources of revenue are tourism, real estate and trade. Name it and Dubai has it. From the tallest building in the world to the largest mall, from the largest artificially made island (housing) to the most expensive hotel. Dubai is the ultimate sign of prosperity and luxury. Investors and business men from all over the world wanted to be a part of it. Dubai was showing an incredible growth rate and it was believed that whoever invested in Dubai would ride upon the magical Arab carpet to affluence. This would have probably even come true for everything ‘seemed’ to be going extravagantly until the 27th of November 2009.

THE CRISIS UNFOLDS

On the 27th of November 2009, the Dubai government owned company Dubai World’s real estate development subsidiary Nakheel asked for a standstill on its payments until May 2010. This is when the bubble burst and the world was lifted out of oblivion and the true story behind Dubai’s economic condition was revealed. Nakheel (a subsidiary of Dubai World) was entrusted with the development of major reclamation projects such as the Palm Jumeirah, Dubai Waterfront, the World islands and the Universe Island. It is also the developer of several residential projects and malls including Dragon Mart which is the largest Chinese mall outside Mainland China. For such extensive and unrealistic project development, Nakheel had to resort to large scale borrowing from foreign banks...
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