The current global crisis has hit the rapid development in Dubai. In recent years, the Gulf state became a magnet for property investors attracted by the prospect of substantial returns, and has been marketed as a luxury shopping, holiday and high-profile sporting events destination. The position of Dubai has been set as an international finance and trading center within today’s global economy. Now the boom appears to be slowing down.
The Biggest developers have started firing staff and paring projects. Government-owned developer Nakheel, one of Dubai’s largest employers, reduces its workforce by 500 people.
Dubai’s banks like Emirates NBD ENBD.DU have blocked consumer credit to employees of companies at risk, and at least one major mortgage company has stopped lending altogether.
Many investors fear that individuals and corporations going to have troubles paying back Dubai's non-bank foreign currency debts estimated at just under $70 billion.
Shares in the region have lost around $1 trillion since the beginning of the year as investors fled. At the end of April the UAE finance ministry announced its plan of 70 billion dirhams ($19 billion) injection into the banking system, and has already been looking at doing more to keep interbank liquidity flowing.
Huge problem of UAE’s downturn is connected with cheep workforce - unskilled construction workers, mostly from South Asia (from India and Pakistan), who have flooded regions of the Gulf during the building boom for the last few years.
High rises and tourist resorts were built by legions of those foreign workers. Dubai became an international magnet, reinventing itself as a financial capital and tourist mecca in the Persian Gulf. Then the global crisis reached this outpost and boom turned into bust. More than half of the construction projects in the United Arab Emirates, worth $582 billion, have been put on hold. Hopefully some projects are still going ahead, thanks, in part, to the $10 billion bailout from the UAE's capital, Abu Dhabi. But still most of income labors are unemployed and forced to pack and return to their origin countries or stuck here and wait for better economic situation.
Worker advocacy groups - including the United Nations International Labor Organization - have increased pressure for wider protection covering the hundreds of thousands foreign workers faced with unemployment nowadays. The demands include ending the illegal-but-common practice of companies holding workers' passports, effectively blocking their chances of looking for other jobs under the country's sponsorship system.
Lots of editors and experts have optimistic approach and say that the region is starting to react to the economic downturn. Dubai has moved to stabilize its economy with its $20 billion sovereign bond program. For the short term, it should be sufficient to meet the city's refinancing needs this year and lend stability to the economy. Government is counting that the oil prices will return, situation on the real-estate market will correct and there will be a very quick rebound in Dubai. On the other hand there are also economists that have not so optimistic view about economic future in Dubai. Behind there is shown a movie with discussion about future of Dubai in light of the ongoing financial crisis.
Although the Dubai real-estate and development market suffer from the financial crisis, and unemployment is rising, the economy is still growing. Dubai will be probably among the first countries to benefit when the worldwide recession is finally over.
Dubai is beginning to recover from the impact of the global economic crisis as international financial markets show signs of thawing and federal financial support begins to take effect.
The recovery will be fuelled by the return to the market of liquidity and the availability of capital for real estate investments. UAE government says that 2009 is going to show a continued state of challenge and reducing rates in the market. In 2010 they see some traction formed with a bit of stability, and in 2011 they see as a period of recovery.
All we can do is to observe what will happen in global economy and if prognostics are suitable to the real situation in Dubai – the pearl of the Persian Gulf…
Sources for all 3 posts:
reuters.com
nubricks.com
abs-cbnnews.com
propertywire.com
arabianbusiness.com
gulfnews.com
breakingviews.com
sevenload.com
youtube.com
wikipedia.com
They did not know what to do with money, so they built even without any common sense.. Instead of this fact I think that in nearest future, when the crisis will be over they will finish all already started projects and Dubai will be highest city in the world.. ;)
ReplyDeleteWe should worry about us rather than Dubai.
ReplyDeleteSo what's with this 'crisis' hype? In Dubai there is no real economic crisis, as in Poland also there is no real economic crisis. Our economy is just slowing down. We should be happy we're not living in Ireland or USA where people loose theirs houses and life time savings.
ReplyDeleteI think that investors in Dubai I mean Sheikhs do not feel crisis at all, they have enough money to build etc. They just want to locate money somwhere. Because according to the arabic law you cannot earn money on money I mean you cannot get interests from your money.
ReplyDeleteor maybe we should send them Tusk? ;)
ReplyDeleteHe'll make another Ireland ;)
ReplyDeleteI think that another duck will be better.
ReplyDeleteLet’s send them the duck and they will see what the word "crisis" really means.
ReplyDeleteSzymon s3737, I totally agree with your opinion. I suppose that Dubai have a huge possibility to become one of the most important city in the world.
ReplyDelete