Ibrahim full essay
Dubai Crisis
Introduction
Dubai is located in the Gulf region who rich in natural resources energy such as oil and gas. Dubai government lack of these resources which was encouraged it to looking for alternative economic resources to be in the same level of wealth with its neighbors. Dubai government has established several companies to help its to reach its goal by creating a very convenient environment for businesses and financial services. Most of these companies are operating in infrastructure project and construction field. The largest one is Dubai World which was accumulated around $59 billion of dept in recent years. It has announced to its lenders to delay its payment into next six months.
There are a number of people who consider that the collapse of Dubai is inevitable. This essay will argue for the ability of Dubai to overcome this by focusing on what Dubai World is? And the reasons for and implications of this crisis. In the end I will give my view about how Dubai will avoid bankruptcy.

What Dubai World is?
Dubai World is a giant firm was established by Dubai government in 2004. This firm owns several companies under its umbrella. These companies operate in property development, hospitality, tourism, private equity investment and financial services. Also, Dubai World owns DP World which was a very successfully company. It operate in marina terminal port around the world. Dubai World has recruited more than 50,000 employees to work in huge number of subsidiaries in more than 100 cities in the world. Accumulation of debt on Dubai World as a result of a enormous of new project which had financed by credit. That lead to difficulty for it to repay its payment during a decreasing of revenue due to the global financial crisis .

Reasons of Crisis
There are several reasons lead to accumulate dept for Dubai, as a result of that Dubai has announced its appealing to lenders to delay its payment to next six months.
The main reason which (professor Richard J. Herring as cited by anon 10/12/2009) believe that is low interest rate had encouraged Dubai and many countries to spent enormous amount of money by credit. Also he point out that weakness in lending regulation lead to increased volume of credit with out guarantees the ability of borrowers to repay their payment in the same time which was agreed.
Dubai has exploited these opportunities of offering credit from international banks with low terms and condition to launch new project in development and construction. The ability of Dubai companies to pay its payment back has decreased due to they depend on international revenue. As a result of global financial crisis , they cannot repay their payment.

Implications :
Global financial crisis has a negative effects on property boom in Dubai. The absence of home buyers led to reduced expenditure of giant companies. Also, layoffs. Restructure of staff and delay some growth plans are used as a way for finance current project (Barea. P. 14/11/ 2009)
Dubai's stock market has dropped into lowest level since its launched in 2004. The decrease was especially in companies which have project will take long time to finish. The reluctance of lenders for financing speculators in property companies has caused more fallen in stock market. Even though. Financing demand has been risen by citizens, lenders have set up new regulation for credit to reduce the problem of cash (Davies. P as cited by Barea. P. 14/11/2009)
Dubai crisis has created several problem in different aspect. NBD. The largest bank in UAE, has ceased landing to foreign workers. Might that they will lose their duty or face staff restructure. Firing staff is caused civil problem. Dubai has to deport foreign workers who lose their job to avoid some civil protest.
There are a high opportunity to maintain property in Dubai. Abu Dhabi is anticipate help Dubai to overtake this crisis. Central bank in UAE has argued plan to prevent continues meltdown in Dubai, property companies and banks in UAE. Also, they are arrange liquidity as well for this plan.
it can be say, that there is no doubt that Dubai will face several problem as a result of credit crisis. Firstly, unwilling of finance providers will led to reduce profitable aspect. Secondly, fragility economy has created confident crisis in investors. Thirdly, job insecurity cause increase wage rate which will led to inflation. Forth, even if Dubai exceeded this crisis, but still needs long time to builds trust with investors and skilled workers .

Is Dubai will get collapse ?
From these reasons and effects of this crisis we can notes the following . most of these borrowing had used in construction and infrastructure . That main lenders cannot do any thing against Dubai except waiting until they be able to pay their payment or take their asset which are real estate as a compensation of credit.
Even if this happen, real estate still in Dubai and will make a benefit for its economy. I believe Dubai economy in next few years will improve when the world overcome of this crisis and it will be a centre for finance and trade in Middle East.

References:
http://emerging-business-markets.suite101.com/article.cfm/dubai_hard_hit_by_global_crisis
http://www.independent.co.uk/news/world/middle-east/dubai-reaches-for-the-skies-despite-crisis-1857507.html
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2412
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2399