Dubai - An Economic crisis

Dubai is a member of the United Arab Emirates (UAE). This federation, which consists of seven sheikhdoms, began in 1971 after the end of the British mandate. Its population consists of 4.6 million people ( UN estimation in 2008). Its GDP is $44.276. Nearly 80% of its population is estimated as expatriates from India, Pakistan, and the Arab world.

The UAE is considered among the most liberal in the Gulf region. Nevertheless, the Emirates are run by single authoritarian rulers. The wealthiest among the seven emirates is Abu Dhabi, where 90% of its wealth is derived from the sale of oil. Dubai, however, gets only 10% of its income from the sale of oil.

The Emir of Dubai initiated a massive economic development with the intention of building a modern city state . His intention was for Dubai to become the center for business and financial institutions in the region, as well as an attraction for world tourism. Modern shopping centers were built, and many super high rise towers were erected - most of the buildings are vacant. Gulf courses and closed skiing tracts with subzero degree were build. This is done in a country where the high heat and humidity are unbearable most of the year. In addition, Dubai launched a massive land reclamation from the sea to build houses on a palm shaped artificial islands!

The economic planning for development in Dubai was not based on sound analytic and scientific rational. Tens billion of dollars were borrowed in order to embark on such poorly planned projects. Years ago, the World Bank has warned Dubai against such nonproductive economic plans, and now Dubai is facing an economic crisis. The bubble was expected to burst!

Dubai has requested to restructure the paying of its debt to international banks. This crisis had a negative impact on Wall Street, and on other financial institutions in various parts of the world. It was estimated that Dubai owes between $ 90- 160 billion to various financial institutions and investors.

The BBC (12/4/09) reported that a climate of fear prevails among property investors, and that property prices have fallen 50%. It has also been mentioned that some of Dubai banks ranking has been down graded.

In spite of its beautiful sandy beaches and winter weather, Dubai does not have antiquities of cultural importance that might attract large number of tourists from around the world. High rise towers and fancy shopping malls cannot be the sole magnate for tourism.

As a final note, I would like to add that the ruler of Dubai, Sheikh Mohamad Bin Rashid al Maktoum, should be given credit for his attempt to modernize his state. Thirty years ago, most of the people in Dubai were illiterate and poverty stricken which is not the case anymore. Hence, there is always hope that in the future Dubai will overcome its economic crisis.