Dubai Gets A New Lease Of Life


by allprjct - Date: 2010-03-22 - Word Count: 510 Share This!

In a landmark development, Abu Dhabi announced a fresh infusion of US$ 10 billion to the government of Dubai thereby averting the possibility of a sovereign default. Holders of an Islamic bond that was backed by a sovereign guarantee were demanding repayment and Dubai was on the verge of reneging on its commitment if Abu Dhabi had not intervened and saved Dubai from the brink of a financial disaster. The incident, for sure, has sent a scare in the global financial markets weakening Dubai's credibility as an investment destination.

Dubai, the holiday destination of choice for millions of vacationers all across the world suffers from a systemic problem. It can no longer fund its ambition of being an 'international metropolis' only through oil revenues. It therefore, relies heavily on debt to achieve its objectives and has put itself in a precarious position. To pull itself out of such a shaky position, it badly needs to reschedule its debts with immediate effect. Debt rescheduling is critical for Dubai as it needs low cost credit to emerge out of the slump that has plagued its economy for over a year now.

Analysts' closely observing the Middle-East financial market point out that Dubai's present problems arise of its Government's warped attitude towards international creditors. Though it is very easy to start a business in Dubai, closing it down is virtually impossible as Dubai has enacted laws that are heavily biased in favour of debtors. According to World Bank estimates there is only a ten percent chance of a creditor recovering his dues from Dubai's bankrupt companies.

The Government of Dubai needs to put in place a system that weeds out the bad apples from the barrel and rewards companies with strong corporate governance mechanisms by providing them easy access to low cost capital. Unless these systemic flaws are corrected and strong fiscal and monetary policies implemented which minimize the impact of economic uncertainties, Dubai will not be spared from the debilitating effects of another economic recession that might lead to a sovereign default by the Government of Dubai.

However, some industry analysts point out that in case of a sovereign default by the Emirate of Dubai in the near future; the impact of such a collapse will however be limited as Dubai combined GDP makes up only 0.1% of the global economy. If you are planning a holiday to dubai this year then be prepared to witness empty buildings and suspended construction projects-most notably 'The World' an archipelago of man-made islands that was for some critics, nothing but an exercise in ostentation.

However Dubai's worsening financial situation hasn't in any way reduced its allure amongst vacationers who are always on the lookout for cheap and exciting holiday deals to dubaiduring the November to March season that is perhaps the best time to visit Dubai.

Inspite of all these handicaps Dubai continues to attract millions of visitors each year who come to explore this exciting city state in the heart of the Arabian desert that offers deserts, beaches, mountains and artificial ski-resorts to those looking for a fun-filled holiday.

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