Dubai Crisis

http//hubpages. com/hub/FINANCIAL-CRISIS-IN-DUBAI-REASINS-AND-EFFECTS FINANCIAL CRISIS IN DUBAI-REASONS AND EFFECTS Dubai- scotch military strength That is Dubai-sky piercing towers, rotating buildings, spectacular architectural designs,flow of petro-dollers,broad and clean road notworks, etc,etc. Businessmen, investers, and lusury- give awaykers, used to see Dubai with all zeal. Some weeks ago, Dubai had issued to international investers, bonds worth $1. 9trillion,whiched sent the message that its scotch position is unshakable just now that foundation has shaken unfitness to rapay impart instalments All these indicate that Dubais financial foundation is SHAKING Reasons Dubai, remote other six emirates of UAE is not a country rich with fossil crude anele resources. This city state is purely a assembly line city solely depending upon tourism and other backinges. Dubai World, in a haste to attract initiation enterprenuers friendted spending more and more on building fine roads, star hotels,etc. Foreign institutional investers similarly invested much here, especially during the demise quaternion years.But, for some reason, whitethorn be due to economic crisis mainly, FIIs didnot turn to Dubai for investment.. AS a result, real-estate businessin Dubai suddenly collapsed. This made an impact on other businesses too. personal effects Dubai domain, has business tie-ups in different countries including India. Thes befuddles, may be delayed( resulting in speak to increase), or dropped, or prolonged. Unemployment problem may arise in Dubai. Enterprises may have to retrench a portion of their employees. 0 lakh Indians be working in Dubai and other UAE countries.Foreign Institutional investers, who have business ties with Dubai World, may face loss. 70 financial institutions have lent impute to Dubai manhood. curses in Duabi may face crisis. When the world is rec everywhereing from last years economic recession, this may push it back to same posit ion. Ray of accept. Inspite of all these, experts hope that it is possible to recover. It comes out of past experience. Dubai had faced similar economic crisis in 1999. Then Abudhabhi, another emirette in UAE, had helped Dubai by lending a loan of $1,00,000. Abudhabhi is a financially stable country..It can help. But the quantum of need this condemnation is muchmore than it was in 1999. Just on 29th,November,Abudhabhi has proclaimed that it would concider the financing aspect,item wise, taking to each one main transaction on merits. It has also clarified,it is not going to comprise full responsibility of all loans. Top ten financial institutions of the world By greater optimism and assurances by America, major part of the world succumbed to globalization and WTC agreements. American companies, for their profit, encouraged the buying habits of people in the globe, finance and gold stockThe economic powers in the world were amazed last week when India purchased 200 tonnes of go ld from International monetary fund(IMF). This purchase undeniable an investment of Rs. 35,000 crores. India also announced ABU DHABI, Dec. 2 (Xinhua) The financial crisis sweeping the world that emerged from Wall Street has taken its toll on the United Arab Emirates (UAE), displace the Gulf crude oil colour producing countrys economy into an uncertain path. In the first fractional of 2008, the world saw a steady rise in oil prices, which climbed to a record high of 147. 27 U. S. dollars a barrel on July 11.However, the soaring oil prices did not get a firm groundwork since then, with the supply and demand factors remained in a balance, as top officials of the oil cartel Organization of Petroleum Exporting Countries (OPEC) had said repeatedly. After the fanciful factors gave way to the fundamentals in the market, oil prices began a journey of correction, declining below 60 dollars a barrel, which represented a drop of more than 60 percent compared with the peak in July. T he decline of oil prices was no intimately news for the UAE, for the oil sector accounted for about 35. 9 percent of the countrys gross domestic product in 2007.Local newspaper Gulf News estimated in July that the oil revenue of Abu Dhabi whose production accounts for nearly 94 percent of the UAEs crude oil output, would reach 100 million dollars if the price remained on high level. But the figure seems impossible now. In addition to oil prices, the UAE is facing a reverse in its property market which has been booming since the government allowed contrary investors to buy property on a freehold basis in 2002. A report released by Morgan Stanley in August predicted a decline of 10 percent by 2010 in the property market of Dubai, the UAEs commercial and financial hub.But the correction of prices in the UAEs property market came earlier than Morgan Stanley predicted. In November, HSBC said in are port that property prices fell in October by four percent in Dubai and five percent in Abu Dhabi, which is the first ever since2002 and may be a turning height of the six-year bull market. In the stock markets, the UAE has been suffering a free conk this year, a similar experience that some emerging markets had during the same period. On Nov. 16, the Dubai Financial Market (DFM) index closed at 1,981. 4 points, falling by 68. 51 percent from the years peak of 6,291. 87 points on Jan. 15 with a loss of 4. 67 meg dirhams (1. 27billion dollars) in market value. On the same day, the Abu Dhabi Securities Exchange (ADX) also fell to its lowest point this year, with its ordinary index hitting2,755. 62, down 46. 48 percent from 5,148. 49 points on June 11 with a loss of 1. 52 billion dirhams. BANKS TIGHTENING PURSE string section The UAE Central Bank held a meeting with representatives from all chamfers operating(a) in the country on Sept. 8, trey days after the U. S. investment slang Lehman Brothers filed for bankruptcy, to assess the status of the UAE banking gove rnance. A statement released by the Central Bank after the meeting said that the UAE banks had no exposure to Lehman Brothers and there was no bodyic risk in the UAE. But the statement also revealed that the countrys banking system was also facing a lack of fluidness by maxim that various suggestions for boosting liquidity of banks were also discussed. On Sept. 2, the Central Bank announced the establishment of an emergency lending facility worth 50 billion dirhams for banks operating in the country, marking the first move to inject liquidity since the Wall Street meltdown emerged. After that, the UAE government took more stairs to shore up the banking system. The Central Bank announced on Oct. 8 a two-percentage-point cut in its lending rate to 3 percent in a bid to boost liquidity of local banks. It also lowered the rate on its repurchase of certificate of deposit (REPO) from 2 percent to 1. percent with effect from Oct. 8. In mid-October, the UAE cabinet said that it clear-c ut to take preventive measures to support the banking system. Under the measures, the government leave alone depict a three-year guarantee to deposits and savings in all national banks and unconnected banks with significant operations in the country. In addition, the government will also guarantee all inter-bank lending operations between banks operating in the country and inject sufficient liquidity in the financial system if and when necessary.The government also pertinacious to inject another 70 billion dirhams into the banking system. Despite the measures taken by the government, the lack of liquidity has made banks operating in the UAE tighten their purse strings. HSBC raised its minimum salary compulsion for a personal loan from 5,000 dirhams to 10,000 dirhams in October and doubled it again in November to 20,000 dirhams. Another major foreign bank operating in the UAE Lloyds TSB decided in November to stop lending to customers who wanted to buy apartments.In the meantime , the bank lowered its loan to value ratio on villas to 50 percent from 80 percent in October. The UAEs national banks, including the countrys largest bank Emirates NBD, were also reportedly tightening their impute. UNCERTAIN PROSPECT OF MEGA PROJECTS In the past few years, the UAE has witnessed a boom in its property market, with prices quadrupled. The property sector became an important subscriber to the countrys efforts to diversify its economy so as to reduce the dependence on the oil industry.Property developers in the UAE launched a series of iconic projects during the boom, including the three Palm Islands and Burj Dubai, the highest architecture to date in the world. The success of those iconic projects in promoting themselves and their developers and the continuous upturn in the property market have encouraged developers waste more mega projects. In October, Nakheel, the developer of the Palm Islands, announced a new project named Nakheel keep & Tower. The project, whi ch will cover an area of more than 270 hectares and accommodate over 55,000 people, will include a tower more than 1,000 meters high.If completed, the Nakheel Tower will take Burj Dubais title of the worlds highest building, whose current height stands at 688 meters. According to Nakheel, the Nakheel Harbor & Tower will take more than 10 years to complete. Now, with the credit squeeze and a possible bear market for the property sector, the projects indispensability seems uncertain. In fact, Nakheel said in mid-November that it will reassess its immediate business objectives to accommodate the current economic climate. The next few months will see a scaling back of activity around some of our projects.