guardian.co.uk – The next few hours are vital to understanding whether tremors in Dubai will trigger the next round of global financial panic. No seismic event in the markets (be it a crash or rally) is complete without Wall Street, but the New York Stock Exchange was closed for Thanksgiving yesterday, leaving everyone unsure just how jittery big investors really were and making it hard to contact banks to check their exposure.
Combine that with a lack of clarity in the Middle East due to the Eid festival, and it will be easy to dismiss those sharp falls in other world markets yesterday as an over-reaction if New York opens up today (2.30pm UK time). Another downward lurch, on the other hand, would cement the pessimistic view that bankruptcy in Dubai will bring down a fresh wave of banks and lead to yet more defaults in turn.
My view however is that the Dubai crisis is a scary wake-up for the world regardless of whether the panic spreads in the public markets. Unlike the stockmarket bubble of the late 1990s, the global debt bubble that is collapsing right now will take decades to resolve itself fully. The difference is that companies (and countries) that have taken on too much debt can limp on for years before the grim reality catches up with them. Most observers suspected the Dubai construction boom would come badly unstuck long ago, but it has taken nearly two years for those most closely involved to acknowledge the inevitable.
Other bubble economies (including the UK) have also only just begun the painful process of deleveraging necessary to dig ourselves out from underneath the mountain of debt. Low interest rates and government intervention may have bought us a bit of time, but they haven’t removed the problem. In many cases, only bankruptcy can do that now.
The world is getting smaller and smaller and our economies are so intertwined now that one bit of the twine snaps and the rest comes unravelled
Worrying times
Not quite a jewel of the desert, eh?
I for one am drooling with anticipation with the thought of Dubai failing. This so called JEWEL of the desert is an abomination paid for by oil profits on the backs of all industrialised nations.
FAIL and fail fast!
if every country has economic problems then where did the money go
Ya everyone went to Dubai and now everyone left.
Beautiful! With any luck my insurance company is heavily invested in Dubai.
At what point did ANYONE think that these megaprojects – financed with promises of $5+ a gallon gasoline – be self-sustaining?
The whole enterprise is based on what some call “redistribution of wealth”, and is a perfect example that wealth is no longer created, but stolen.
Ozymandias was not alone…
Dubai only makes up a little more than 5% of the landmass of the UAE…they have little to no oil money.
I do think it is a little amusing though…when I lived in Dubai not so long ago the state was lauded for creating an industry that would survive once fossil fuels ran out.
I have a horrid feeling that the indentured workers who were doing what amounted to forced labor in the desert sun for little to no pay are now going to be put in even more inhuman circumstances. But of course we here in the west wouldn’t care about that, concerned as we are with our own financial markets.
Dubai is a city built by the longstanding Arab tradition of using Asian, non-Muslim slave labor.
The city deserves to fail, and will if there is any justice in this world.
Dubai is nothing but the rest of the world but bigger. It has stolen most of its ideas from Orlando and claimed them as its own. It is not a real city because it lacks the infrastructure a city needs to survive. It was so focused on impressing the rest of the world that it forgot to actually build what it needs to survive. My hope is that the money used to build Dubai will now be re-focused on places like Orlando, places it was to start off with.
@Roshambo, that was the first thing that came in my mind as well, imagine how many of the workers will be left with nothing.
Wow whats with you guys, what is this a we hate Dubai club meeting? How is Dubai any different from any other wealthy country USA included?
Those people who invested in Dubai, did not understand
a place with restricted Islamic laws that prohibited social freedom with no tourist attraction or interesting cultures , or historical or natural at attractions place and no pleasant out door climate. in Middle of Dessert. With only a flashy buildings made of cement and iron, how can its boom can last ?
@WTF, the difference is innovation. Dubai has been recreated into a financial center for the region – that’s it. Where’s the sustainability in the long term when its the financial markets themselves which are falling? They’re not offering a new product or a new market – just a new place for people to get together to talk about their new products and markets. It’s just another service-based economy.
They built in a boom time to sell to a recession crowd. It’ll be the investors who take the hit on this one and I’d be very surprised if there was any banking fallout.
Ive been to Dubai to do business, they will survive. They are a hub for asia and europe, with the backing of wealthy abu dhabi and european tourist they will lead the east along with china and india.
deny everything it doesn’t matter. until you’ve actually been there to understand the place in question you will only know what you see or hear from limited source. ie most of the people on here still thing petro dollars built dubai, it was in fact investment dollars and very few petro dollars.
agree with someone. and this doomed desert disneyland was built off slave labour with little thought to environmental impact or sustainability. they pump sewage into the ocean outside 5 star hotels! does anyone really think that an air-conditioned beach, or a golf course watered with desalinated water would last?
It is a moot point, after 12/21/2012 everything on the globe will burn, including their skyscrapers.
Biggest this, largest that. Guess not anymore, eh? I feel sorry for all the slave labour there…
Interesting article, thanks for posting
Durr lets build a diamond city in the desert,
instead of feed a billion people who are starving.
The government of the whole has created so much liquidity, sustaining an impending global inflation that they cannot a new default to derail all their efforts. Otherwise some countries will commence to withdraw quickly in safer haven asset and the whole world economy will collapse financially. However this would be an ideal time for improvished countries to cry default.. their debts as would be expected will be forgiven… be prepare for a messier financial situation
Good dang deal!!!
Ok its clear a few people here have no clue what they are talking about.
First of dubai isn’t a oil country..no oil profits .
Just because they are in the middle east and a dessert country doesn’t mean oil.
Polluting the ocean..where do people get their facts for heaven sake.
They spent two years figuring out the impact on ocean life and how to avoid such before anything even started and hired the worlds best to prevent this.
Heck watching the discovery channel would have told them as much.
The prince did a great deal for his country and its better off then it was in the past.
Perfect no and were mistakes made yes.
They are feeling the affects of whats happening like the rest of the world and its not something any of us say coming.
Iam shocked at how cliche and stupid some of the comments are though with no real clue to whats going on or even a attempt to do homework to find out.
I’m one of those “European tourists” that you’ve mentioned, but my home country is not on the visa on arrival list, which forced me and my family to wait close to 2 hours at the airport after arrival to get my retina scanned. Considering this experience, this is surely the last time I’ve visited Dubai. This was the worst immigration service ever and I’ve been traveling to more than 50 countries, so I can compare.
@Magnus33: believe it or not, you can’t learn everything from the discovery channel. part of jumeirah beach was closed earlier this year because human and industrial waste was being pumped into the ocean.
perhaps you should stop watching discovery and check up on some real facts yourself. go to google and type in “dubai pollution” and see what happens.
and while you’re at it, type in “dubai slave labour”
wake up
Wishing for the economy of one country to fail show how shallow some people can be. They don’t realize that when one fails, it comes at a cost to all of us.
Will they have to shut down their indoor ski hill too?
*sniffle*
Dubai reminds me of when in sim city I used cheats to get lots of money and I build a huge great city but couldn’t get any body to come to it and then eventually when I did mobs just ran through the streets or it was all destroyed by an alien
You know, it’s funny, the snake oil salesman of hope is now the President of the U.S., he’s run his country’s credit card to its limit and I can’t think of a time when there was less hope among the people of the U.S.
It looks like he was just the slickest politician in the race. The people of the U.S. should have skipped the audacity of hope for the necessity of experience.
….. not all are like dat… but their customs is still worrying…
Im a Dubai resident for the past 4 years and have seen the rise and to some extent the current setback that Dubai is facing.
Are there are issues such as labour rights, pollution, regulation etc which needs to be fixed ? Yes
Is there anything being done about it ? Yes.
Would this be the end of Dubai ? No
I wont say that there are justification for all the problems that Dubai faces, however critics should understand that any economy which is trying to outpace the general rate of growth would have issues such as the ones’s raised by most of the comments here.
At the end of the day, its a question of relatively how much Dubai has gained and what price has it paid for all this ?
Pre 90′s Dubai was pretty much a small city known only within the confines of the region with not much to look forward to except for the Jebel Ali Port which gave the city its status as the regional hub.
But since then the vision and the audacity of the ruling family has attracted a massive base of expatriates to the city and has redefined what the middle east means to the rest of the world. The laborers or the so called ‘Slaves’ have also benefited from this boom. The average asian labourer is not stupid enough not to know the extent of the exploitative nature of the place they are going for ‘indentured’ labour.
There has been problems in terms of proper regulatory intervention to ensure protection of labour rights, but this is not something which has been done out of malicious intent as its being made out to be by the media. Dubai has always been upto speed to fix these issues.
Time would be the best judge of how sustainable and how true the dubai story is …
This is what you get dubai for being so arrogant and trying to build future before it’s time. Seriously, the first projects were okay but then it got ridiculus… circulating skyscrapers? Snow resort in desert? Common..
Dubai will be fine and prosperity is yet to come for all the haters who wish to see this happening in Europe and the US.
Dubai economy is NOT dependent on oil as many here think.
As for slave labour – only when you are forced to work, you can call yourself a slave !
Wow. I live in Abu Dhabi, the capital of the United Arab Emirates, of which Dubai is one emirate of seven.
I can tell you, without a doubt, large portions of beach and ocean are being polluted regularly in Dubai. search for 7 Days newspaper and then search for pollution and you can even see photos of the nastiness. No joke, human fecal matter floating on top of the waves at the beach.
In addition, there are unbelievably ridiculous nasty conditions at the labor camps (the un-air-conditioned “longhouses” where the laborers live 12 to a room that’s roughly 3 meters by 6 meters) with the sewage system designed to handle 50 people unable to handle 300+ people’s sewage needs. Again, human fecal matter and raw sewage making small lakes on the ground, and the laborers are expected to return “home” to this every day after working for 8-14 hours a day in 100% humidity at 52 degrees.
However, Abu Dhabi has a lot of oil. Das Island is one of the largest production sites in the country. Look it up. Research ADMA-OPCO (Abu Dhabi MArine Oil Producing COmpany). There is oil onshore *and* offshore here.
Without a doubt, Abu Dhabi is the richer emirate, but Dubai is not far behind. Granted DXB are taking loans from AUH now, but you have to remember that just about everyone in the government, whether it be the local gov’t of DXB, the local gov’t of AUH, or the federal gov’t of the UAE, they are all related. The founder of the UAE, Sheikh Zayed, had 19 sons. One is the Ruler of AUH (and thus the UAE), one is the Ruler of DXB. They’re brothers. So, do you really think that there will be any kind of crisis in DXB while AUH remains economically strong? Oh, and let’s not forget the fact that rich Saudi Arabia has already started financially supporting the UAE via Sharjah (another emirate) in return for Sharjah becoming more and more conservative.
Look, to get back to the original article, Dubai cannot become bankrupt. Dubai will not become bankrupt. If there was any kind of “tremor” in the market, it’s because of the Eid holiday, followed so closely by the National Day holiday. Every government office is closed from Nov 26 to Dec 5. They’ll open again for regular hours on Sunday. (remember that the weekend here is Friday/Saturday, not the western standard Saturday/Sunday)
Dubai is officially Tatooine and all the world credits jumped in the pit of Sarlaac.
They can export the world’s most expensive water and call it “Oasis”, and market it as how the ultra-rich used to live. The oasis that was just a mirage, can now function as a moisture water farm in the desert.
I am a student of finance. Lets see what they have done. Dubai borrowed from local banks and foreign banks and invested the money in building their own infrastructure. They did not invest the money anywhere else on the planet. This is absolutely perfect.
Banks have Dubai government guarantee and do not have any assignment of their assets. So a fire sale of Dubai Government assets is not likely. The banks will now be forced to sit down with them and negotiate. Depending upon negotiation may be banks will end up getting 40 cents to a dollar or 30 cents to a dollar. The world will forget about the default in one or two years. Dubai is left with a great infrastructure in tact and in their ownership.
Dubai is the financial hub of the region. It will come back up once more. There is no other city in the region with an infrastructure like Dubai. From Singapore to Frankfurt there is nothing and the demand for a financial center remains strong.
Just recall when the 2008 meltdown happened everybody was scarred from injecting money into the financial markets. Those that had balls went and purchased assets at throw away prices. They are the winners. Buy property in Dubai today to make the millions of the future.
Success does not come to those who wait…and it does not wait for anyone to come to it. – Unknown author
Several people have brought up interesting views, however the bottom line is we live in a world economy, which translates into their bankruptcy directly affecting our market and economy. WE can no longer carry or absorb world market ripples. This whole situation does not bode well for us!!
I’ve been to this area several times, and each time I’ve been struck by the insanity of building overnight megacities in the middle of a sun-blasted, dust-scoured wasteland. Socialite nitwits can feel free to play there all they want, I’ll never go back.
As for the slave labor, you’d better believe it is the institutionalized rule, not the exception. 20+ workers share a small apartment, employers seize visas to hold over their heads, and they are paid virtually nothing. If this area does collapse financially, it will be the most richly deserved failure of the modern age.
Who cares what happens in Dubai? As if anyone was actually going to live in that area, surrounded by so many religious fanatics. Any bank who backed up that silly venture, has had it coming. I can understand investments in the middle of existing huge cities on earth, such as New York, Amsterdam, Paris, London, or even in more rural areas around those cities, for families who want to live next to the city but not too far away from it, but Dubai? I do not see how the Real Estate situation in Dubai has anything to say about Real Estate anywhere else. It’s like the moon.
dubai was built by pure dumbness and greed of the sheiks and now it’s falling over their heads that’s true, but you have to remember dubai its not a country, it’s just a state, and uae still have their petrol to exploit, but definitely all the euphoria will be gone forever.
Really interesting article here: http://bit.ly/8nkHdB – The dark side of Dubai.
i laugh at anyone who thinks that its all over for dubai..all i will say is wait and see..
THIS IS WHAT HAPPENS WHEN PEOPLE WHO HAVE NO BRAINS FOR BUSINESS WANT TO DO BUSINESS.THIS DUBAI CROWD OF BUSINESS CARTOONS SHOULD LOOK TO SINGAPORE AND LEARN HOW A SMALL ISLAND CAN TURN TO A BUSINESS HUB OF THE EAST.WITH NO OIL OR OTHER RESOURCES IT CAN DO BUSINESS WITH THE WHOLE WORLD.THIS DUBAI CRISIS WILL GET WORSE ITS GOING TO PULL ALONG ALL ITS INVESTORS.THEN DUBAI WILL LOOK LIKE AFGANISTAN.